How to Start Your Own Travel Agency TodayWritten by Bernard on June 21, 2017
This is one type of business that continually bounces back economic downturn after economic downturn: the travel agency business.
Travel is a big part of many people across the globe in virtually every country. As such, there is a wide variety of travel that people tend to do, including domestic, international, adventure, eco-tourism, food and wine related, family, etc.
For that reason, the travel industry is gigantic. In fact, according to the US Travel Association, every year the travel and tourism industry generates $1.3 trillion (trillion!) in economic activity, which comes to $3.4 billion every day. And that’s just in the U.S.
Although the advent of the internet seemed to have spelled doom for the traditional travel agency, actual evidence shows that not much has changed.
The modern travel agency provides services to:
- the retired
- spring breakers
- specialty groups (Christian, LGBT, theater, etc.)
- business travelers
They can also tailor their services to groups who are willing to have someone else arrange their travel, such as:
- technologically- or internet-challenged
- travelers with complex demands
- first-time cruisers
- travelers with specialty demands, like eco-tourism, visiting Amazonian tribes, etc.
- travelers wanting to simply save time and money
In the past, traditional travel agencies were established businesses with many employees and agents all around the world. However, nowadays that is not necessary.
You can start your own home-based travel agency with much lower overhead and similar revenues. If you’ve ever considered turning your passion for travel into a business, now is the perfect time to start.
Table of Contents
I. The Advantages & Disadvantages of Starting Your Own Travel Agency
While many people are eager to dive into the business parts of their new travel agency career, it’s important to get an overview of what you should expect.
These are the ups and downs that come with the travel agency business, and it’s important to keep them in the back of your mind while you’re navigating your new field.
1. The Advantages
We’ll start off with all the great parts of starting a travel business.
You’ll be your own boss
For the most part, you’ll be able to determine how and when you work.
While this is not true in practice (you need to make money, so you’ll be working for your customers essentially), you still have the freedom and flexibility to determine your own fate.
You get to do what you love
This is a big one, and perhaps the biggest motivator of all. If you love travel (which is kind of required for this type of work), then you’ll love helping other people enjoy their travel.
Opening your own travel agency means that you’re willing to share your love and experience in travel with other people. You will give them advice, plan their holidays and do much more. And because it’s exciting, you’re essentially getting paid for doing your hobby.
Discounts and FAM trips
One of the great perks of being a travel agent in general is that you get lots of benefits when it comes to traveling. Hotels, cruise lines, tour companies, ski resorts, etc., will grant discounts to travel agents regularly.
There’s also what’s known as FAM trips, or familiarization trips, which are designed to familiarize travel agents with the destinations they’re selling. These are often heavily discounted, and many times even free.
If travel is your business, you can deduct your trips as business expenses. This is, of course, only if the purpose of the trip was to check out a new hotel, city, etc. for your business.
This can help you to save a lot on your taxes and, with a home-based travel agency, you can really minimize your overhead.
2. The Disadvantages
Knowing just the good parts of your new travel agency career will give you an unbalanced view of what’s to come and give you unrealistic expectations.
Let’s look at the disadvantages that often come with starting your new travel career.
You’ll have all the responsibility
The other side of the coin of starting your own travel agency is that you won’t have a boss or marketing department or sales department. You will have to do all those things on your own.
You’ll have to pay your own taxes, get your own customers, answer your own emails (the millions and millions of emails). While exhilarating in the beginning, these things can take a toll on you later on.
Lots of customer time
One thing about being a travel agent is that your goal is to help make your customers’ experiences as perfect as possible.
However, something always goes wrong. It can be a small thing or a big thing, but it usually happens. So that means you’ll be on the phone a lot. Either talking to customers or working on fixing the problems.
And these calls can and will happen at any and all times of the day and night, so be prepared for that.
You’ll likely have lots of activity in your business based on the time of year. During peak holiday seasons, there’ll be a lot of pressure and you’ll be on the phone a lot.
Clients tend to have high demands, all of them wanting the best flights and rooms at the lowest prices. It can be difficult to bring them down and keep them happy at the same time.
Risks and competition
Because the barrier to entry is quite low for travel agencies, there tend to be quite a lot of competitors. This can be minimized by niching down (for example, eco-tourism, adventure tourism, etc.) but will still exist.
Beyond that, if there are any economic downturns, luxury expenses like travel will take a hit and therefore your income will reduce significantly.
II. The Fundamentals of the Travel Agency Business
Now that we’ve got a good overview of what to expect in your new travel agency, let’s look at what the most important things are you need to cover first.
These include setting up y our thorough travel agency business plan, as well as figuring out what price structure to use for your business.
1. Your Travel Agency Business Plan
No, business plans are not dead. Although every so often a blog post makes the rounds declaring that business plans are a thing of the past, those are usually short-sighted.
This is because many of these writers look at a business plan as something solely for investors. They are created to get additional funding, and once that funding is received, you can forget about it.
While business plans are crucial for getting additional funding, that is in fact not their primary purpose.
Primarily, business plans are there to help the business owner set a path for his or her business. Therefore, it’s a road map to help you navigate your travel agency, to set its goals and prepare for the pitfalls.
In order to have an effective business plan (not something scribbled on a bar napkin), you’ll need to include the following sections:
(Note: there’s no discussion of length here; business plans should be as long or as short as needed. The important thing is that you cover them comprehensively but concisely.)
- Executive Summary: this part of your business plan will summarize the strengths of your new business. Because this is a summary (although it is first), we recommend you do this last so you’ll have a clearer idea of what to mention.
- Business Description: this part will go over what the most crucial aspects of your business are.
- Industry and Competition Overview: here you will need to have good, in-depth research about your industry, including the competitors and the industry growth and trends.
- Operations and Management Plan: for this part, you will list the daily operations of your travel agency. You should also describe the management structure and how these parts will work together to achieve your goals.
- Service Description: here you’ll need to discuss the competitive benefits of your business and why customers would be incentivized to choose you.
- Marketing Strategy: this section will go over the marketing strategy for your travel agency. You’ll need to figure out how you’ll get your services to the right clients at the right time, including your service promotion, price and sales channel.
- Financial Projections: in this final section, you need to show all those important numbers. You need to calculate your revenues and expenses for certain time periods (most often a year, 5 years or more). You will also note whether you need any additional starting capital.
2. Your Travel Agency Fees
Travel agencies make money from their clients, but not in the traditional sense. Because there are so many moving parts to any trip, the travel agent is able to collect fees from each part.
These moving parts include the airline, the rental service, the hotel and many more.
Let’s look at the ways travel agencies can make money providing excellent adventures for their customers.
Free Independent Travel Commissions
One of the ways that your travel agency can make money is by what’s known as free independent travel, or FIT. FIT is for travel products that your agency sells on a one-time basis.
For example, if you sell a customer five nights at a 4-star hotel, a car rental for the last three days and the return flight, and all of these are bought separately (not as a package), this is considered a FIT booking.
Here the commissions are based on the individual sales. Therefore, the hotel can pay you 10%, the rental car will give you 3-5%, and the flight will dole out a flat fee of $40.
The commissions are according to the agreements you make with those agents and will be paid out once the trip is completed and paid for.
You can also add small fees for your service to the client.
Your travel agency can also get great commissions on packages that you sell. Packages combine popular travel products into one, making it easier for your client to purchase without having to arrange many moving parts.
With packages, ground operators get the travel agency to choose their available product based on certain attractive features.
When the package is priced, it already includes the agent commission. These commissions generally range from 10-20%, although larger ground operators or bigger travel agencies can get better deals for their own business.
Your travel agency makes money from airfare, but it isn’t as high (or as flexible) as the other sources. For that reason, the commission is normally a flat fee, rather than a percentage.
Airline margins are quite slim, as the price the customer pays and what the airline charges doesn’t offer room for much more.
Beyond that, airlines are crucial for most travel, and therefore they have the negotiating power.
Most of the commissions that your travel agency will be making will come from any additional items your customer will be buying.
This often includes:
- travel insurance
- concierge travel services
- private transfers
- cancel-for-any-reason coverage, etc.
These items can come with lucrative fees and upfront commissions and help boost your travel agency profits.
III. Travel Agency Qualifications, Licenses, and Insurance
Now that you’ve got the fundamental aspects of your travel agency set up, you need to make sure you’ve got all your necessary documentation.
This includes the qualificaitons you need to have, your business and other licenses, as well as the necessary insurance.
1. The Qualifications
Luckily, you don’t need to have any formal education to be a travel agent.
Most travel agencies, when they are looking for great travel agents, will require at least a university degree, although the field isn’t particularly important.
What’s more important for starting your own travel agency is that you have the right skills. One of the most important part of skills is that a lot of it is learned, so it comes from experience.
If you’ve worked as a travel agent before, then your experience and skills will make you perfect for your new business.
If not, you will need to have at least great telephoning and customer service skills, as you’ll be communicating with your clients a lot.
The other important skills are:
- time management
- some technical skills
- persuasion and negotiation
- active listening
While you don’t need any formal degrees, if you want to start your own successful travel agency, you’ll still want some extra “proof” of quality.
That’s where certifications come into play.
The golden standard for certifications is the Travel and Tourism Professional certification given by the International Air Transportation Association (IATA) and the Certified Travel Associate from the Travel Institute.
You may also look to get certificates in travel, tourism and hospitality management (and other related certificates) from other organizations.
While the qualifications are more often recommended rather than required, it’s a different thing for licenses.
Licenses cover the legality of your travel agency, so you should be very certain you have the proper documentation to start your business legally.
In the US, travel agencies don’t need to get any licenses or certifications on a national level. However, there are different state laws and you’ll need to check with your state what your licensing requirements are.
For example, in Hawaii, California, Florida, Washington and Iowa, travel agencies need a Seller of Travel license.
In Canada, the licensing requirements also depend on the location of your travel agency, while in the UK you’ll definitely need what’s known as an Air Travel Organiser’s License.
Besides those licenses, you’ll need to get your business in order. This is an important step for all businesses, and you need to make sure you’ve got the right structure for your business.
For the most part, if you’re in the US, you’ll want to choose an LLC for your business. It offers the protection you need, without having a very complicated structure.
However, if you are planning on getting outside investors, you might want to consider starting your travel agency as a corporation.
Now it comes as no surprise that there are quite a few risks that come with traveling abroad. Because of that, and that you’ll be selling vacation planning to your clients, you’ll need to make sure you’re fully covered.
General liability insurance
First and foremost, you’ll need to have adequate general liability insurance. This will provide coverage that will take care of any medical, ambulance and other hospital costs. It will alsocover your legal fees from bodily or personal injury.
You will need to have this insurance due to any confusion or misunderstanding your client may have from your advertisements. If the misunderstanding leads to incorrect booking or activities not suitable for the client, general liability will cover you in case of any suits or injuries.
Errors & ommissions insurance
This type of insurance, normally known as E&O insurance, will cover you in case any lawsuits are brought against you by third parties claiming that you were negligent somehow in your professional activities.
This is often confused with general liability. However, general liability differs by covering you in claims against bodily or personal harm or property damage. E&O covers you against claims of professional negligence.
For that reason, it is also known as Professional Liability Insurance.
Commercial automobile insurance
This type of insurance is necessary if you use your personal or company car for work purposes to protect you in case of auto accidents. This may often be the case if your travel agency is for travel in your area.
This insurance can also cover rental vehicles or loaner vehicles used for your travel agency.
Workers compensation insurance
This type of insurance is necessary if you will be having employees. In fact, nearly every state requires it, depending on the number of employees.
Workers comp will protect you in case one of your employees is injured or falls ill while involved in business activities. It will pay for medical treatments, medication, and even loss of wages. If an employee’s injury results in death, it will also pay standard death benefits to the family of the employee.
IV. Getting Clients for Your Travel Agency
Now we get to the most important part of your travel agency—the clients. Specifically, how do you get people not just interested in your travel agency, but willing to pay money for your expertise?
We’ll look at three methods you should be using in order to market your new travel agency.
1. Traditional marketing
While traditional marketing practices are fast falling out of favor in this digital world, there are still some traditional methods that work very well.
Conferences and networking are more for the back end of your business, as you connect with suppliers and destinations to get great prices.
For the front end, dealing with customers, you need to use the media to your advantage. This doesn’t mean running commercials, which can be expensive.
Instead, try to get a story in your local or national newspaper or on a popular news program. Just make your expertise known, so that if there is some big news in that area, they’ll know who to connect.
With a great story at the right time, you can start building up your brand.
2. Your website and blog
This is the greatest resource you have to build up your travel agency potential client list. Your blog or website is crucial, and millions of people are eager to get away (in real life or in their heads) from their boring day-to-day.
That’s where your blog comes in, with strategic content marketing or inbound marketing. Beautiful pictures and videos of the destinations your travel agency works with. Wonderful stories of adventure, or useful tips on what to do and not to do.
You should be able to promote your destinations with ease and find lots of traffic coming to your site. Next you’ll need to convert those visitors into email subscribers (and then into clients), or promote your services and make them your clients from the get-go.
Of course, you’ll also need to have reviews on your site, so make it easy for past clients to leave a glowing review for you.
3. Social media
Lastly, you need to utilize social media to your full advantage. It is perhaps the greatest method at the moment that businesses have to directly communicate with their customers and potential customers.
It has a great ROI (return on investment), as a few dollars can make your Facebook post, for example, reach tens of thousands of people.
Facebook of course is the golden example of a perfect social media platform. It has the right balance of demographics and an audience in the billions.
You should have an active and regularly updated Facebook business page that shows off the amazing images and videos from your destinations.
It’s also a good idea to also utilize Facebook Live (hopefully on-location) to answer any questions your followers may have about your particular destination.
You don’t need to stick to one platform either. Instagram and Pinterest are great venues for travel-related industries, and you’ll have no problem picking up loads of new visitors.
The travel agency business can be a lucrative one, especially if you work from home where you’ll have lower overhead. Before you start, remember the pros of starting your travel business:
- you’ll be your own boss
- you’ll be doing what you love
- there are great discounts and FAM trips
- there are lots of tax benefits
However, let’s not forget the downsides:
- you’ll have all the responsibility
- you’ll need to spend a lot of time communicating with customers
- there’s a lot of seasonal pressure
- there are plenty of risks and competition
When you start working on the basic parts of your travel agency, be sure to:
- include a strategic business plan to outline your goals and how you’ll get there
- take note of the four ways you can earn commissions from travel sales
If you start your travel agency business, you’ll need:
- to have the proper communication and organizational skills
- travel agency licenses, depending on your state or country
- adequate insurance to cover all possible mishaps
If you want to get clients for your travel business, you should utilize:
- traditional marketing, such as getting into local or national newspapers
- get your website and blog set up and provide valuable, appealing information
- organize your social media strategy to pull in readers on various platforms
With these thorough and bulletproof steps, you’ll be able to really take charge of your travel agency.