Are you toying with the idea of starting your own travel company? Many travel companies are developed and started by an individual with a passion for a particular part of the world. Or, an individual who has a hobby that they love and want to share opportunities with like-minded people. If you would like to make your passion into a business, starting a travel company could be the route forward for you. But the first big question all travel start-ups have is a big one: “Should I start a Tour Operator or a Travel Agent Business?”
What are the main differences between starting a Tour Operator or Travel Agency?
There are differences between a tour operator and a travel agent and considering which one your business will fit into really depends on what type of travel you are looking to sell. The main differences are outlined below:
A tour operator combines tour and travel components to provide a holiday. The most common example of a tour operator’s package would include a hotel, a transfer from the airport, a specific activity and possibly a flight. Niche tour operators may specialise in specific destinations, e.g. Italy, Sri Lanka, Bali, UK, activities, and experiences, e.g. skiing, music trips, cookery holidays, photography holidays, safaris, special interest tours, or a combination of both.
For-profit, tour operators usually negotiate net rates with suppliers and then add their own margins onto the package on a percentage or per passenger basis.
As tour operators act as principal for the packages they provide they also have to provide financial protection in line with the 1992 Package Travel Regulations or ATOL.
A travel agent is a private retailer that provides travel-related services to the public on behalf of suppliers such as hotels, flights, car hire or package holidays (tour operators).
A travel agency’s main function is to act as an agent selling travel products and services on behalf of a supplier. Consequently, unlike other retail businesses, they do not keep any stock in hand. A package holiday or a ticket is not purchased from a supplier unless a customer requests that purchase. The holiday or ticket is supplied to them at a discount and profit is, therefore, the difference between the advertised price which the customer pays and the discounted price at which it is supplied to the agent. This is known as the commission.
As agents sell packages on behalf of tour operators financial protection is generally not required as the consumer’s contract is direct with the financially protected tour operator. However, many travel agents now wish to provide financial protection to provide their customers with an added level of protection and peace of mind. Also, The New Package Travel Directive is impending and it could be that travel agents would also require protection under the new legislation.
Why start a Tour Operator over a Travel Agency?
Ultimately this is a commercial decision and one that you can choose. Whilst both have their benefits if you want the flexibility to design your own packages using your own individually selected suppliers, be in control of your own profit margins and put your own personal touch on each trip you sell then starting a tour operator is probably the best option for you.
If you have decided on starting a tour operator then please see our page regarding starting a travel company. If you’d like to learn more about what the PTS membership offers you, please get in contact with one of Protected Trust Services’ (PTS) lovely staff members by calling 0207 190 9988. Alternatively, you can visit our member support and travel trust account pages to learn more about how we protect you.