How to start a travel agency

There’s no point beating around the bush – the travel industry was one of the biggest losers of the coronavirus pandemic.

Various lockdowns forced the nation to stay indoors, while holidaymakers were banned from travelling abroad. According to ABTA, a trade association for tour operators and travel agents in the United Kingdom, this has led to nearly 100,000 job losses in the sector.

However, from the ashes rises new life for the tourism sector. Market analysts have stated that post-Covid, holidays and experiences will be one of the most sought-after activities for the average traveler.

As a small travel agency, you won’t be able to compete with the bigger giants in terms of price, but you’ll be able to offer a more bespoke customer experience – perfect for the more selective needs of the post-pandemic consumer.

But how do you set up a new business in an industry that’s still recovering?

Our experts have been providing guidance for small business owners throughout the turmoil of the past 18 months. We’re here to help. In the below guide, we’ll take you through the current rules and regulations for setting up a travel firm, as well as the highlights, the pain points, and the support that’s available.

So buckle up your seatbelts as we set course for travel agency startup success.

How has COVID-19 affected the travel agency industry?

Tourism and travel was hit hard by the coronavirus pandemic. As global borders closed, even the biggest airlines have lost millions as they struggled to cope with a near-complete loss of consumers and a lack of government support outside of the furlough scheme.

Indeed, according to ONS figures, monthly air passenger arrivals to the UK fell from almost 7 million in February 2020, to 112,300 in April 2020. That’s an unprecedented drop of 98.3%.

Thankfully, if you’re hoping to start a travel agency business now, you’re jetting off at a much better point than the sector found itself at one year ago.

In the UK, coronavirus restrictions have lifted and air travel is once again permitted for tourism purposes. Plus, with the large number of government guidelines which are being constantly updated, many consumers are looking for a curated experience to help guide them through the challenges of PCR tests and vaccine passports.

How has COVID-19 changed holidaymakers’ behaviours?

Post-Covid, there will likely be a surge in travelling as people take advantage of airlines and train travel opening once again. Indeed, when the first announcement that lockdown restrictions would seen be lifted came, holiday bookings surged.

There are many reasons that the current demand could surpass previous tourism levels.

Psychologically, the coronavirus pandemic is leading many people to hunt for more experiences following 18 months of being stuck in one location, meaning many more consumers are getting itchy feet.

Remote working has also enabled people to travel much more than in previous years, as annual leave becomes more flexible and people can work from anywhere.

However, there are still concerns amongst some UK travelers that our soaring coronavirus cases might cause some countries to close their borders. This is making many people more wary about booking ahead.

Reassuring policies, such as refund protection, are therefore a good idea for new travel agencies.

The travel agency market: developing a niche or USP

Setting up as a travel agent shouldn’t be confused with being a tour operator.

The difference is that the former sells the holidays, while the latter organises them. It’s possible to set up as an independent tour operator but there is a lot of competition for big firms that have the buying power to keep prices lower. Travel agency ideas could include bespoke holidays on a particular theme or to a particular region – think about what will make you stand out.

Travel agencies are more about selling advice to your clients than holidays. Your customers want to be reassured about how they can hire a car, or what local customs they might need to adhere to.

Post-Covid, they’ll also want to know about whether they will need face masks, how long they need to self-isolate for. You should keep an eye on the gov.uk website for foreign travel and updates.

You don’t necessarily need to have experience of the industry. As with most things it may help, but the most important thing is to be prepared for a steep learning curve.

For added security, you may want to consider a travel agency franchise (examples include The Travel Franchise, The Global Travel Group and GoCruise).

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Costs to start a travel business

It’s quite possible to start out as a travel agent from home with a desk, a laptop and a telephone line. You can start to build up a client base from among friends and family so it isn’t technically difficult to get started.

But you do need to think bigger than this if you want the business to survive. Competing on a local level or around the high street are both non-starters to a successful business. A truly local business won’t survive in such a changing market and the high street will bring you up against the big names. You need to open up to a national audience.

Look into an area that isn’t well served already by travel agents. If you can find no obvious reason for this and there is apparently a need for your business, set up there. Alternatively, start a business that isn’t office based and that provides something of a niche service.

Martin Jones started Freedom Direct on the back of Teletext rather than on the high street. Never intending to be a walk-in business, his main research was establishing links with the banks because he needed an £80,000 bond to start off. Links with a trade association will again help with things like this.

How much does it cost?

Premises: If you’re starting from a secondary location rather than prime retail site, rent will obviously be reduced. As above, specialised travel services are more likely to work with you remotely so it matters less where you’re based. However, a remote – if cheaper – location may be a turn off when it comes to recruiting staff. This is not generally an industry where staff is highly paid but there is competition to recruit good people in the first place so additional perks may work well.

Staff: Look for people who’ve worked in the industry before who’ll be attracted to the discounted holidays and offer them good working conditions. Roughly speaking, salaries are on a par with office work but as with all jobs you should expect to pay more for extra talents (such as languages) or experience.

Advertising: Getting your name known is as important as in any new business. Local newspapers, yellow pages and Teletext are all good ways – although decent regular adverts aren’t cheap. Word of mouth is effective but be aware this isn’t an industry where repeat business necessarily follows. An established client base will pass on word of your excellent service to its friends but intense competition for price means people will always shop around – even if they end up coming back to you. You will have to constantly address and re-address service, quality and value for money and let people know about it.

Internet: The buying public has grown used to shopping around online even though it doesn’t always want to buy online. Use the internet as an additional advertising or information tool to bring people in and answer basic questions. Then offer personal service and advice for their queries. That way both you and your potential clients save time and effort by having all information to hand when sorting out the details of the holiday. The web builders below are a great cost-saving option for any business that wants or needs a professional looking site.

To help itemise the costs needed for your travel agency business plan you may find it useful to download our free business plan template.

Financing your travel agency

Setting up a travel agency takes money. You might be starting the business with the money you’ve saved; however, in many cases, people will raise capital to get started. Fortunately, there are a number of options available:

Startup loans – the Startup Loan company is a government backed scheme where you can borrow up to £25,000 with a fixed interest rate of 6% p.a.

Business loans – business loans are similar to a startup loan, except that they are not just for new businesses and don’t have the same caps.

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How much can I earn as a travel agent?

The travel industry is commission-based so every time you sell a holiday for a tour operator they give you a percentage of the fee. This is where getting your name known will be important, though, as international tour operators aren’t going to offer an unknown business favourable rates. Commission varies a lot.

Striking an agreeable commission agreement will become easier once you are a member of a trade association – in fact they’re unlikely to look at you without. Travel agents don’t give out individual commission rates for obvious reasons but there is a general idea within the industry.

Minimum commissions start at around 10% but the high street names will be getting around 18%. So you’ll find it very difficult to compete if you are at the lower end of the scale.

Cash management is another issue of which you need to be aware. The customer will pay you a deposit on the holiday when they book it but the remaining amount won’t be paid until about eight weeks before date of departure. Only then will you receive your commission from the tour operator. However good cash management in the booking season of January and February will see you better off in the summer months.

Overall you need to be aware that being independent will not yield big money initially unless you can find a niche market that pays well. If you can find a consistent market for specialist holidays to far-flung destinations this may happen sooner.

The amount you earn really does depend on a simultaneous ability to sell to customers and to strike deals with the suppliers. So at the forefront is the need for excellent service to both of your customers: the holidaymakers and the tour operators.

Get the balance right and you might just have the ticket for success.

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Travel agency trade associations

Trade associations are clearly important to the success of a travel business, if you want customer and industry confidence it seems you can’t really start up without one.

Global Travel Group is specifically aimed at start up businesses, this association runs as a franchise to provide licensing and bonding to independent travel agencies. It provides support, IT booking system and national tour operator deals while allowing agencies to run as independent businesses under their own names.

• Membership costs start from £14,995 plus VAT, with lifetime and lease options available
• The agency owner is free to sell after three years with the membership passed on as an asset to the new owner
• Also Global Travel Group will provide booking system technology as a part of the fee
• for further information visit their website.
  

ABTA is the best known of the associations with the largest membership of agencies and tour operators. It will ensure you are taken very seriously from day one but as such its membership is exacting in its rules and not cheap. Start up companies may wish to progress to ABTA when they are more established.

• Business must demonstrate a minimum paid-up share capital or proprietor’s/partners capital of around £30,000, but this is flexible
• All members are required to provide a bond to reimburse clients in the event of the member’s financial failure
• Registration fee of £330 plus VAT to be submitted with application form
• And once offer of membership made, one off entrance of £1,200 plus VAT
• Plus additional annual subscription fee, from £817 per year, depending on the size of the business
• for further information visit their website.
  

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Tips for travel agency success