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Most travel agencies earn revenue through commissions. Consumers often choose agencies because they help cut down on time needed to research various locations and book accommodations. A popular trend in the industry is online agencies, which operate mostly or exclusively online.
Who is this business right for?
This business is perfect for individuals who are passionate about travel, love learning about and visiting new places, and are very detail oriented. Travel agency owners have very flexible hours but usually only after they have an established book of clients.
What happens during a typical day at a travel agency?
Day-to-day activities of a travel agency owner include checking faxes, phone messages, and incoming emails. You may also meet with clients and book numerous client trips during the day.
What is the target market?
Most clients and customers are people who want to travel to another country. While domestic agencies do exist, the market is really in international travel these days. The types of clients an agency might serve depend entirely on the current market place. Client needs range from simple vacations to corporate retreats to medical tourism.
How does a travel agency make money?
Commissions are the way in which travelling agencies have traditionally made the majority of their income. Airlines and hotels would pay agencies a certain fee for utilizing their companies when booking for a client. However, with the recent proliferation of booking technology, including Google Travel, travelling apps, and company websites, these businesses are more accessible to consumers and no longer rely on travelling agencies to promote their services. For this reason, airlines and hotels have largely stopped paying travel agencies commissions. As a result, travel agencies have been forced to adapt, focusing less on simple bookings and more on navigating complex itineraries and the legalities of travelling in specific regions or countries. They have shifted to charging flat rates for bookings and hourly rates for consulting services related to planning travels and navigating legalities.
What is the growth potential for a travel agency?
Most small travel agencies are started as home-based businesses. Larger agencies adopt a traditional office model. Agencies can be run as a single-owner business or as a multiple-employee organization.
What are some skills and experiences that will help you build a successful travel agency?
There is no formal education or certification required to become a travel agent, but some states require you to have a license to operate as an agency:
Aside from that, there are voluntary certification programs that may help you enhance your knowledge of the industry and of travel in general:
Certified Travel Associate (CTA)
To get the CTA, you must have 18 months experience in the industry. You must take 8 core classes and 4 electives. You can finish your course in 3-6 months, but you have up to 12 months to finish. Cost for this course and exam is $350 and $250 for the test only. To maintain this certification, you must complete 10 CE credits each year.
Certified Travel Counsellor (CTC)
You must have 5 years experience in the industry and a CTA designation. There are 10 courses to complete, including a 3,000 word “white paper” assignment (in which a complex issue is explained concisely in a report). You must finish in 12 months, but may finish in 9 months. Cost is $550 for the course and exam or $320 for the exam only. To maintain this certification, you must complete 10 CE credits each year.
Certified Travel Industry Executive (CTIE)
This designation is only for non-consumer sales roles. You must have 5 years experience. The course consists of 100 videos, each 10 to 15 minutes in length. You must also complete a 2,000 to 3,000 word “white paper.” It takes 18 months to complete the course. Cost is $550 for the course and exam or $320 for just the test. To maintain your certification, you must commit to the annual Travel Institute membership and take 10 CE credits each year.
What are the costs involved in opening a travel agency?
While some sources suggest you can pay a host agency $400 to $1,200 to get started from home, there are host agencies that don’t charge you anything to use them as your host. A host agency basically takes care of all the regulatory and back office requirements and splits the commission with you as the business owner.
To start your own independent agency may cost you between $1,000 and $10,000, depending on the markets you serve and your existing book of clients.
What are the steps to start a travel agency?
Once you're ready to start your travel agency, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:
- Plan your business. A clear plan is essential for success as an entrepreneur. A few important topics to consider are your initial costs, your target market, and how long it will take you to break even.
- Form a legal entity. Establishing a legal business entity prevents you from being personally liable if your travel agency is sued.
- Register for taxes. You will need to register for a variety of state and federal taxes before you can open for business.
- Open a business bank account. A dedicated checking account for your travel agency keeps your finances organized and makes your business appear more professional to your customers.
- Set up business accounting. Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
- Obtain necessary permits and licenses. Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
- Get business insurance. Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
- Define your brand. Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
- Establish a web presence. A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Select your state below for an in-depth guide on completing each of these steps in your home state.
Where can I find a business mentor?
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
How to promote & market a travel agency
Most new agency owners come from an established agency and have a book of clients. If you don’t start with an established agency, you must advertise your services. The best source for clients are referrals.
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How to keep customers coming back
Agencies that are the most successful are specialty shops. For example, a travel agency might specialize in medical travel or corporate travel. A general agency will find it difficult to compete in today’s market.
How and when to build a team
A travel agency can be built with a single owner. However, time is the limiting factor. Because this business carries a low overhead, your need for employees is limited by your time in the business. When it’s time to expand, most agency owners hire another agent or support staff so they can delegate responsibilities.
If you start with a host agency and want to move away from it, then you would expand by hiring administrative personnel to handle the regulatory and back office functions.
State & Local Business Licensing Requirements
Fourteen states require a Travel Sellers Registration License to sell travel. A license can be obtained through an application, which typically involves a fee and supporting documents such as membership in a professional association. Here is a list of states requiring Travel Sellers Registration Licenses.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
Maintain Personal Asset Protection
Don’t think that just forming an LLC, or any other type of business, will save your personal assets in case of a lawsuit or other matter by itself.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.
Two of the simplest steps that will protect your business, and yourself, are to:
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
Certificate of Occupancy
A travel agency is usually run out of a physical location. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to an travel agency business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for you business’ location to ensure your travel agency business will be in compliance and able to obtain a CO.
How much can you charge customers?
Travel agents working independently typically charge $30 for booking a flight, $50 for sleeping accommodations in a single destination, and $100/hour for research and planning advice. If a travel agent manages to procure commissions from an airline or hotel, these will typically be around 10%.
What are the ongoing expenses for a travel agency?
Fortunately, expenses for this type of business are low and are limited to printed brochures and typical office paperwork. If you are working through a host agency, some or all of your advertising may be paid for.
How much profit can a travel agency make?
First-year income for a home-based agency is between $30,000 and $50,000. As the business expands, revenues can rise to over $100,000, but this usually requires hiring other agents and staff support.
How can you make your business more profitable?
Travel agencies that specialize tend to make more money. For example, according to the US Bureau of Labor and Statistics (BLS), travel agencies can bring in between $30,000 and $50,000 per year. General agencies or agencies that offer only leisure travel services make the least, while corporate and medical tourism specialties tend to make the most.
There are several types of specialties in the travel industry:
- Leisure Agent
- Corporate Agent
- International Agent
- Medical Tourism Agent
- International Agent
A leisure agent books primarily leisure and vacation travel. For example, this might include family vacations or sabbaticals.
Corporate agents primarily book travel for corporations. Usually, corporate clients are looking for business trips or retreats. Often, the corporate client needs special attention, including complex booking schedules that include both accommodations, local travel, and entertainment
Medical tourism is a highly specific niche segment of the industry. These agents research countries for medical patients who want treatments that are either not available or are too expensive in their home country. For example, a patient may be looking for an experimental cancer treatment which is only available in a particular country.
International agents book international travel plans. These could be for corporate clients but are typically for individuals. These individuals may be looking for universities abroad, a new country to buy property in, or even a new country to move to.