Going places - How to start a travel agency business
UK consumers spent around £81 billion on holidays in the 12 months to April last year. Despite fears about Brexit, and worries about the buying power of the pound abroad, holidays are still big business. Millions of Britons jet off to foreign lands at least once each year, and many more opt for more frequent domestic breaks.
It can mean big opportunities for setting up as a travel agent.
“I love to travel - so running a travel agent was a natural choice. Customers appreciate my enthusiasm - and the fact I can call on local knowledge of the places they are going.”
What about the internet?
Of course, the internet has changed the rules of the travel industry. It is easy for holidaymakers to book flights, accommodation, hire cars and arrange insurance from their laptop or even their phone. But whilst the online travel market is booming, high-street travel agents still have a big share of the market, particularly for packages and with older holiday-makers.
There are challenges. But for the determined travel agent who can treat the internet as a resource rather than as a threat, things may be on the up.
“The internet can be a threat - you need to use it as a tool if you want to succeed.”
How much can you earn with a travel agent business?
The travel agent industry is commission-based. Every time you sell a holiday for a tour operator they will pay you a percentage of the fee. This commission varies a great deal - to get good rates you will need to become a member of a trade organisation and arrange an agreed level of bookings.
Minimum commissions start at around 10% but the high street chains may be getting considerably more, with figures of 15% up to 18%. There are also negotiated rates for flights and hotel bookings, and fees for things like arranging documents and foreign currency. The more business you arrange the better the rates you may be able to negotiate.
“Nobody will tell you how much commission they are earning in this business. Learning how to negotiate with travel companies is one of the skills you have to learn.”
The skills you need
You need to understand how the travel industry works, and the most common way to start as a travel agent is to find work with a travel agency and train on the job.
A college qualification may not be essential, but it may help you build the skills you will want to call on. Some relevant courses include:
- Level 1 Certificate - Introduction to the Travel and Tourism Industry
- Level 1 Certificate - Travel and Tourism
- Level 2 Award - Principles of Customer Service for Hospitality, Leisure, Travel and Tourism
- Level 2 Certificate - Travel and Tourism
Local knowledge and customer service skills are also essential - as is the ability to make full use of the internet to find the deals your customers need.
Once you have a grasp of the basics, it’s quite possible to start out as a travel agent from home with a desk, a laptop and a telephone line - but you do need to think bigger if you intend to build a business.
Taking a shop on the high street - where you will be competing against the remaining big-name players - is unlikely to succeed. Successful new travel agents tend to work online and serve a national audience - and tend to specialise in the services they provide.
For some, this means working in a niche such as business travel. If you can become the travel agent of choice for a large corporation with people needing flights and accommodation around the world it can be the ideal basis for a business that is busy all year round.
Other travel agents may specialise in travel to a particular location. Building expert local knowledge of a key destination could help you corner a lucrative market.
“I have family in Australia. That gave me some contacts in the Australian market as well as local knowledge. Oz is a big destination for Brits, so it was a natural choice for my business to focus on.”
What are the costs?
Like any business, you will need to invest to start up - although are if you are starting a one-person business the costs could be minimal, especially if you can work from a room in your home.
Walk-in business is now becoming rarer, so you may not need costly premises on the high street, and so a desk or desks in a shared office or business incubator may be completely adequate.
However, staff can be crucial to building your business. Travel agency work tends not to be highly paid. Salaries may be similar to basic office work but you will need to pay more for people with languages or experience. Many good people come into the travel business for the perks, which can include heavily discounted, and even free, holidays.
Marketing is growing in importance for the travel industry too. You can’t count on repeat business - competition is fierce and sales are price-sensitive, meaning that people will always shop around. Press advertising that will be seen by your target market is essential, as is online marketing.
Travellers have grown used to going online to arrange travel which means you need an effective web presence. If you are providing a specialised service, it can help to include material about your key destinations - it can help ensure that it is your site that is seen when potential customers search online.
Building a website that lets people book online can mean automating your business and driving down your costs, but you will need to invest in a site that is not only distinctive - it must be easy to use and completely reliable and secure. For this, there are specialist website providers who can help.
Cash management can also be a challenge. The travel business is very seasonal and, although the customer will pay you a deposit on the holiday when they book, you will only receive your commission from the tour operator when they receive the full payment. Working Finance to maintain your cash flow during slow months may be essential - and you will want to ensure that you can offer attractive deals on out-of-season trips, such as city breaks and festivals.
Trade associations are also essential. ABTA - Association of British Travel Agents - is the largest and best-known travel association in the UK. Being able to use the ABTA logo on your marketing can be a major asset - but membership is exacting in its rules and not cheap for start-up companies.
Can you grow your business?
Once established, your business will need to grow.
The fierce competition that is a factor of the travel business will mean that you will have to be content with small profit margins when your business is small. It is only when you have achieved sufficient volume to enjoy increased bargaining power to up your commission rate that you can start looking at profit and budgeting.
You may find that running your travel agent business is hard work - but with the right foundations and approach, you can have a share of a growing market, if you can call on the funding you need with specialised finance for travel agencies or even the finance to start adventure holidays and outdoor businesses.