How to start a travel agency

Travel is an essential part of our lives, and it's no surprise that the tourism industry is one of the fastest-growing sectors globally. According to the World Travel and Tourism Council, the tourism industry's contribution to the global economy was $9.2 trillion in 2019. The industry's growth means that starting a travel agency can be a profitable venture for entrepreneurs. However, starting a travel agency can be challenging, especially if you're a beginner. This blog post will provide a comprehensive guide on how to start a travel agency, with a focus on the European market. We will also discuss the benefits and challenges of different models for travel agency ownership, as well as other considerations like licensing costs, GDS agreements, content fragmentation challenges, and back-office costs.

Step-by-Step Guide to Starting a Travel Agency

• Identify Your Niche

  The first step in starting a travel agency is identifying your niche. Travel is a broad industry, and you need to decide on a specific area to focus on. It could be luxury travel, adventure travel, corporate travel, or family travel, among others. Focusing on a specific niche will help you target a specific group of clients and differentiate yourself from your competitors.

• Develop a Business Plan

  After identifying your niche, you need to develop a comprehensive business plan that outlines your objectives, target market, competition, pricing strategy, marketing plan, and financial projections. A business plan will help you organize your thoughts and ensure that you have a clear roadmap for your business.

• Register Your Business

  Once you have a business plan in place, you need to register your business. In the UK, you can register your travel agency as a sole trader, partnership, or limited company. You will need to choose a business name, register for tax, and obtain any necessary permits or licenses.

• Obtain Licenses and Permits

  Depending on your location, you may need to obtain licenses and permits to operate a travel agency legally. In Europe, travel agents must obtain an International Air Transport Association (IATA) license to sell airline tickets. The IATA is a trade association representing the airline industry and sets the standards for the sale of airline tickets. However, obtaining an IATA license can be expensive, and many travel agents choose to work in a consortium to reduce costs.

• Choose a Business Model

  The next step is choosing a business model for your travel agency. You can either work as an independent agent, work in a consortium, or work as an employee for a larger corporate travel agency. Each model has its benefits and challenges.

Independent Agent: As an independent agent, you have complete control over your business. You can set your prices, work hours, and target market. However, you will be responsible for all the costs associated with running your business, including marketing, technology, and back-office costs.

Consortium: Working in a consortium allows you to benefit from the collective purchasing power of a group of travel agents. You can access lower commission rates, reduced fees for GDS systems, and shared marketing resources. However, you will have less control over your business, and you may need to follow the consortium's rules and regulations. An example of a popular UK consortium is Travel Counsellors.

Employee: Working as an employee for a larger corporate travel agency can provide you with a steady income, benefits, and training opportunities. However, you will have limited control over your business, and you may need to follow your employer's rules and regulations.

• Choose a GDS System

A Global Distribution System (GDS) is a computerized network system that enables travel agents to book flights, hotels, and car rentals for their clients. GDS systems provide access to travel content from multiple suppliers, making it easier to compare prices and options. The three major GDS systems are Sabre, Amadeus, and Travelport. Choosing a GDS system can be a significant expense for travel agencies, as there are setup fees, monthly subscription fees, and per-transaction fees. However, using a GDS system can also be essential for selling travel products, especially flights.

• Develop a Marketing Strategy

Marketing is essential for any business, including travel agencies. You need to develop a marketing strategy that targets your ideal client and sets you apart from your competitors. Some marketing strategies you could use include social media marketing, email marketing, content marketing, and paid advertising.

• Build Your Network

Networking is crucial in the travel industry. You need to build relationships with suppliers, other travel agents, and potential clients. Attend industry events, join travel agent associations, and build partnerships with other businesses to expand your network.

• Offer Excellent Customer Service

Customer service is essential in the travel industry. Clients want to work with travel agents who are knowledgeable, responsive, and attentive to their needs. Always prioritize providing excellent customer service to build a loyal client base.

• Invest in technology

You’ll find it hard to grow your business profitably without the right technology in place. We might be a bit biased when we say this, but you should certainly have a firm grip on the data flowing through the agency, and use tools such as Agentivity to maximise the opportunities that exist within the data you generate. Make sure whatever technology you use is open for integration with others, and offer you a flexible licensing agreement to adapt with you as your business grows.

Benefits and Challenges of Different Travel Agency Business Models

Independent Agent

Benefits:

• Complete control over the business

• Ability to set your prices and target market

• No need to follow consortium or employer's rules and regulations

Challenges:

• All costs associated with running the business, including marketing, technology, and back-office costs, are your responsibility

• You have to take ownership of ensuring the agency follows all airline and other supplier rules - some of these can get complex

• Limited support and resources

Consortium

Benefits:

• Access to collective purchasing power and shared marketing resources

• Reduced fees for GDS systems and lower commission rates

• Ability to focus on selling and providing excellent customer service rather than managing the business's back end

• Access to resources with specific experience and skills in areas such as airline fare rules

Challenges:

• Less control over the business, need to follow consortium's rules and regulations

• Limited branding and marketing opportunities

Employee

Benefits:

• Steady income, benefits, and training opportunities

• Access to an established client base and industry connections

• Less financial risk and responsibility

Challenges:

• Limited control over the business and decision-making

• May need to follow employer's rules and regulations

Other Considerations for Starting a Travel Agency

IATA Licensing Costs

In Europe, travel agents must obtain an IATA license to sell airline tickets. The IATA charges setup fees and annual fees, and the cost of the license depends on your location, sales volume, and other factors. The cost of obtaining an IATA license can be significant, and many travel agents choose to work in a consortium to share the costs.

GDS Agreements

Global Distribution Systems (GDS) provide travel agents with access to travel content from multiple suppliers. However, using a GDS system can be expensive, as there are setup fees, monthly subscription fees, and per-transaction fees. Travel agents may need to sign a GDS agreement with one or more providers to access travel content.

Content Fragmentation Challenges with NDC

New Distribution Capability (NDC) is a travel industry standard that aims to enhance communication between airlines and travel agents. However, the implementation of NDC has led to content fragmentation, as airlines are now offering different fares and products to different channels. Travel agents may need to adapt their systems and processes to keep up with these changes.

Back-Office Costs

Running a travel agency involves various back-office costs, including technology, accounting, and legal services. These costs can add up, and it's essential to budget for them from the start.

In conclusion, starting a travel agency can be a profitable venture for entrepreneurs. However, it requires careful planning, a clear business plan, and an understanding of the industry's challenges and opportunities. Choosing the right business model, understanding licensing costs and GDS agreements, and developing a marketing strategy can help you succeed in the travel industry. Whether you choose to work as an independent agent, join a consortium, or work as an employee, each model has its benefits and challenges.

Ultimately, the success of your travel agency will depend on your ability to provide excellent customer service, build strong industry relationships, and stay up-to-date with industry trends and changes.

Benefits Comparison Chart

Business Model	Benefits	Challenges
Independent Agent	Control over the business	All costs are your responsibility
	Ability to set prices and target market	Limited support and resources
Consortium	Access to collective resources, including better fares	Less control over the business
	Reduced fees for GDS systems and commissions	Limited branding and marketing opportunities
Employee	Steady income, benefits, and training	Limited control over the business and decision-making
	Established client base and industry connections	Will need to follow employer's rules and regulations

Starting a travel agency can be a rewarding and profitable venture. By following these steps, understanding the challenges and opportunities of the industry, and choosing the right business model, you can set yourself up for success in the travel industry.