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How Travel Agents Make Money

by Bonnie Glover

When you think about booking a trip with a travel agent, what comes to mind first? Most people probably picture someone in a yellow polka-dot dress who is waving them away as if they were on a bad TV show. Or maybe you’re picturing a person sitting behind a desk at a travel agency, working on paperwork all day long while their clients walk out the door never knowing that they could be doing this themselves.

While there are certainly benefits to both sides in many cases, booking through a travel agent saves time and money. The truth is that these scenarios aren’t typical. In reality, most travel agencies function more like marketing companies than traditional businesses.

They use various strategies to attract customers, including advertising, referral programs, contests, and special deals. And though travel agents may not always admit it, they also rely heavily on Internet sites such as Expedia, Travelocity, and Orbitz to provide bookings.

How Exactly Does a Travel Agent Make Money?

The answer lies in understanding some unique aspects of the industry. For instance, most agencies don’t just sell plane tickets and hotel rooms; they offer additional services such as tour packages, sightseeing excursions, and even car rentals. Some even specialize in niche destinations such as golf resorts or cruises.

Plus, they often find other ways to generate revenue by selling vacation insurance and rental cars. As a result, travel agents need to be skilled marketers with strong business acumen and organizational skills. This means that they must be adept at juggling multiple tasks, meeting tight deadlines, and staying organized.

Of course, having a great deal of flexibility is only part of being successful in this field. You’ll also need to know how to choose which areas to focus on, select appropriate vendors and negotiate the best prices. Because of all these factors, becoming a travel agent isn’t easy. It takes skill, hard work, dedication, and a willingness to learn new techniques. After all, you wouldn’t want to end up like those poor souls in the TV commercials.

In this article, we take a look at how travel agents actually make money to help you decide whether or not you’d be interested in pursuing a career in tourism. We’ll discuss the different types of travel agencies, the advantages of owning one, tips for success, and the drawbacks of operating without a franchise. Let’s start by looking at the advantages of being a travel agent.

The Benefits of Being an Agent

If you’ve ever booked something online using a Web site such as Expedia, Travelocity or Orbitz, then you already understand the power of word-of-mouth advertising. These sites allow users to post reviews, write blogs, upload photos and share information about their experiences with specific products and vendors.

That’s why they thrive: People trust these sites because they’ve used them before. When they search for something on the site, they expect good service. If they receive anything less, they simply won’t return.

This concept is similar to that of a travel agent. Instead of relying solely on advertisements, however, agents put together itineraries that include flight schedules, hotel availability, and transportation options. Once potential customers view these itineraries, they feel confident enough to contact the airline directly to purchase tickets or visit a particular hotel website to inquire about rates.

By comparison, consumers would likely spend more time searching for the perfect package on a Web site before contacting an agent. So although agents typically charge fees for each booking they secure, they still earn commissions based on the number of tickets sold.

Another advantage of working for a travel agency is the ability to set flexible hours. Rather than waking up early to meet clients at airports, you can sleep until noon and go shopping for souvenirs during happy hour.

Also, since your boss doesn’t call you every five minutes asking where you are and what you’re doing, you can concentrate on your job duties rather than worrying about missed calls and emails. Finally, you’ll have access to free training and mentoring that will help you succeed as a professional.

On the downside, working for a travel agency has its disadvantages too. One major drawback is the fact that agents usually don’t keep track of inventory. Unlike brick-and-mortar stores, where employees monitor stock levels daily so there are no shortages, agencies rarely maintain accurate inventories.

Also, because travel agents rely on outside sources to fill in their gaps, they sometimes have trouble finding last-minute bargains. For example, suppose you’re planning a trip to Paris and you forgot to buy airline tickets well in advance. Since airlines generally require tickets six months ahead of time, you probably won’t find affordable seats available.

However, if you worked for a travel agency, you might be able to arrange for seats on another carrier that arrived several days earlier. On the other hand, if you were a member of a group tour, you’d probably have been given reserved seats. Let’s move on to tips for running a successful travel agency.

Tips for Becoming a Successful Travel Agency Owner

Before opening your own travel agency, you should consider whether or not opening a franchise is ideal for your situation. Franchising provides certain benefits over starting your own company. For starters, franchisors handle the legalities, accounting, and personnel issues involved with setting up shop.

Also, once you sign on, you’ll gain access to expert support from experts who can assist you throughout your journey. With franchises, you can benefit from ongoing training, management assistance, and promotional opportunities.

Once you’ve decided whether to open your own business or join a franchise, choosing an area in which to operate your agency is essential. Think carefully about where you want to locate your travel agency. Consider factors like traffic patterns, tourist attractions and local competition.

Also, evaluate whether or not your target market is large enough to sustain growth. If you plan on purchasing real estate, for instance, you’ll want to ensure that you can easily expand your offerings. Lastly, try to determine if your area lends itself to seasonal changes. For example, if you live near a beach, you’ll want to establish your agency during high season for beachgoers.

Alternatively, if you live near mountains, you should aim to cater to skiers and snowboarders. After deciding upon a location and determining your target audience, you’ll need to decide which vendors to partner with. While it’s tempting to enter into contracts with the biggest names in the industry, it’s important to remember that smaller vendors tend to provide better customer service. Furthermore, partnering with smaller vendors allows you to customize your offerings to suit your clients’ needs.

Finally, it’s crucial to learn how to properly price items. Before putting a product on sale, you should research comparable prices and compare your prices against the competition. Although it’s difficult to accurately predict sales, you can estimate profits by dividing total revenues by expenses. Also, avoid placing products below cost. Customers will soon become suspicious of your pricing practices and may stop patronizing your business altogether.

Disadvantages of Owning Your Own Travel Agency

As mentioned previously, one disadvantage of owning your own travel agency is that you lose control of inventory. Another disadvantage is that you may have difficulty competing in highly competitive markets. For example, if you live in Miami Beach, chances are you won’t fare well against agencies located in places like Cancun and Las Vegas.

In addition, you may not be able to compete effectively if your clientele includes families with children. Many parents prefer to stay in family-friendly accommodations, whereas teens prefer nightlife venues.

Furthermore, if you work alone, you’ll miss out on some of the perks of working as part of a team. Team members can brainstorm ideas and present solutions to problems. Additionally, when you run your own business, you’ll have to pay taxes on your earnings. Franchise owners, however, usually enjoy tax breaks that reduce their taxable income.

Lastly, despite the convenience offered by online travel agencies, it can be frustrating to wait weeks or months for your orders to process. If you order a ticket on your computer but discover that the airline closed down prior to your departure date, you may have to shell out hundreds of dollars to rebook.

To recap, here are some key things to consider when considering whether or not to open your own travel agency: You’ll need to have excellent communication skills and organizational abilities.

Final Thought

Your business will depend heavily on referrals. Customers will have to book through third parties, possibly limiting your exposure to repeat business. You may not have access to specialized knowledge.

It may be difficult to compete with larger organizations.We hope you found our discussion helpful. Now it’s time to check out some links. According to the U.S. Department of Labor, approximately 1 million Americans work as travel agents.

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