XII Unit -2 OPERATIONS OF TRAVEL AGENCY (English)

 Agent

• An agent is a person acting for, or employed by, the principal.

• If a company appoints another person to act for it in the course of business, that person becomes the agent.

• The appointment may be full-time or part-time.

• The agent may or may not receive a fixed salary or a fee from the company.

• In a travel agency, any individual director, employee, or self-employed person acting for the travel agency is an agent of the company.

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Travel Agency

• A travel agency is a private retailer or public service.

• It provides tourism-related services to the public.

• These services are offered on behalf of suppliers such as:

  • Airlines

  • Car rentals

  • Cruise lines

  • Hotels

  • Railways

  • Package tours

• In addition to dealing with ordinary tourists:

  • Most travel agencies have a separate department for business travelers.

  • Some agencies specialize only in commercial and business travel.

• There are also travel agencies that act as general sales agents for foreign travel companies.

• This allows foreign companies to have offices in countries other than where their headquarters are located.

Origins of Travel Agency

• The British company Cox & Kings is sometimes said to be the oldest travel agency in the world.

• This is based on the services that the original bank, established in 1758, supplied to its wealthy clients.

• The modern travel agency first appeared in the second half of the 19th century.

• Thomas Cook:

  • Developed the package tour.

  • Established a chain of agencies in the last quarter of the 19th century.

  • Worked in association with the Midland Railway.

  • Sold their own tours to the public.

  • Also represented other tour companies.

• Other British pioneer travel agencies:

  • Dean & Dawson

  • Polytechnic Touring Association

  • Co-operative Wholesale Society

• The oldest travel agency in North America is Brownell Travel.

• It was established on July 4, 1887.

• Walter T. Brownell led ten travelers on a European tour.

• The journey started from New York on the SS Devonia.

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Development of Travel Agencies

• Travel agencies became more commonplace with the development of commercial aviation.

• This development started in the 1920s.

• Initially:

  • Travel agencies mainly catered to middle and upper-class customers.

• After World War II:

  • There was a boom in mass-market package holidays.

  • Travel agencies appeared on the main streets of most British towns.

  • They catered to working-class customers.

  • They provided a convenient way to book overseas beach holidays.

Review Questions - Answers

Q1. What are the elements of a travel agent?

A travel agent is a person who has the following elements:

• Acts for or is employed by the principal

• Appointed by a company to act in the course of business

• May work full-time or part-time

• May receive fixed salary or fee from the company

• In travel agency: includes directors, employees, or self-employed persons acting for the agency

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Q2. Discuss the reasons behind the origin of travel agency.

The origin of travel agencies was due to these key reasons:

1. Banking services for wealthy clients - Cox & Kings (1758) provided travel services to rich customers.

2. Package tours development - Thomas Cook created organized group tours in 19th century.

3. Railway expansion - Thomas Cook partnered with Midland Railway for tour distribution.

4. Commercial aviation growth - 1920s made air travel accessible to masses.

5. Post-war mass tourism - Working class demanded convenient overseas beach holidays.

6. Tour operator representation - Agencies sold tours of multiple companies.

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Q3. Identify the required assistance you expect from travel agency/tour operation.

From a travel agency/tour operation, I expect the following assistance:

• Booking airlines, car rentals, cruise lines, hotels, railways

• Package tours arrangement

• Business travel arrangements (separate department)

• Overseas beach holidays for working class

• Representation of foreign tour companies

• Convenient booking for ordinary tourists

• Specialized commercial/business travel services

Operations of Travel Agency

Main Function

• A travel agency's main function is to act as an agent.

• Sells travel products and services on behalf of a supplier.

• Unlike other retail businesses, they do not keep a stock in hand.

• A package holiday or ticket is not purchased unless a customer requests that purchase.

Commission System

• The holiday or ticket is supplied to them at a discount.

• The profit is the difference between the advertised price (customer pays) and the discounted price (agent receives).

• This difference is known as the commission.

Licensing & New Trends

• In many countries, all individuals or companies that sell tickets must be licensed as travel agents.

• In some countries, airlines have stopped giving commission to travel agencies.

• Travel agencies now charge a percentage premium or standard flat fee per sale.

• Some companies still give a set percentage commission for selling their product.

Business Strategy

• Major tour companies prefer giving commissions to agents.

• Reason: Selling a thousand trips at cheaper rate is better than hundred trips at higher rate.

• This process benefits both parties.

• Cheaper than advertising and distribution campaigns without agents.

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Other Commercial Operations

• Larger chains undertake additional services:

  • Sale of in-house insurance

  • Travel guide books and timetables

  • Car rentals

  • On-site Bureau de change (popular holiday currencies)

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Financial Protection

• Travel agents protect themselves and clients against commercial failure.

• They advertise being "surety bonded".

• In case of failure, customers get:

  • Equivalent holiday, or

  • Full refund (if preferred)

Bonding Organizations

• IATA - International Air Transport Association (for issuing air tickets)

• ATOL - Air Travel Organisers' Licensing (for ordering tickets)

• ABTA - Association of British Travel Agents (package holidays)

• ASTA - American Society of Travel Agents (package holidays)

Travel Advice Role

• Travel agent should offer impartial travel advice to customers.

• This function almost disappeared with mass-market package holidays.

• Some chains developed "holiday supermarket" concept:

  • Customers choose from brochure racks

  • Book from counter

• Now revived due to:

  • Social and economic changes

  • Multiple no-frills, low-cost airlines

Organization of Travel Agencies

Two Types of Agencies

• Independent travel agencies: Manager-owned, typically employ fewer than five staff

• Multiples: Owned and operated by tour operators and other tourism concerns

Two Basic Principles of Success

• Good quality customer service

• Effective management (controlling costs, motivated staff, building customer base through word of mouth)

Independent vs Chain Agencies

• Independent: Smaller, manager-owned

• Chain agencies: Located in high street/shopping malls with high passer-by traffic

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Travel Agent Tasks
Travel agents deal with diverse tasks including:

• Making reservations

• Planning itineraries (including complex round-the-world travel)

• Calculating fares and charges

• Producing tickets

• Advising clients on destinations, resorts, airlines, and travel products

• Communicating verbally and in writing

• Maintaining accurate reservation records

• Ensuring brochure racks stocked/supplies maintained

• Acting as intermediaries for customer complaints

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Required Skills
Technical Skills:

• Reading timetables

• Calculating fares

• Writing tickets

• Using technology (CRS - Computer Reservation Systems)

Interpersonal Skills:

• Closing sales

• Explaining complex air fares in simple English

Manager Skills:

• Staff management

• Financial management (accounts, cash flow, invoicing, expenditure control)

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Customer Service Standards
To ensure high customer service:

• Greet customers warmly with a smile

• Maintain high standards of dress, appearance, personal grooming

• First impressions matter (posture, manner, body language)

• Be alert, attentive, empathetic

• Match client needs with products

• Always polite, clear expression, maintain eye contact

• Answer telephones promptly and courteously

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Selling Process

• Follow set sequence (consumer psychology of holiday purchase)

• Gradually understand customer wants

• Guide through search, evaluation, re-evaluation

• Present options and manage objections

• Time-intensive process

• Many consumers use web + agency

Review Questions - Answers

Q1. Explain the mechanism of operating travel agency?

Travel agencies operate through this mechanism:

1. Act as Agent: Sell travel products/services on behalf of suppliers (no stock kept)

2. Commission System: Buy at discount, sell at full price (profit = commission)

3. On-Demand Purchase: Book only when customer requests

4. Licensing: Required to sell tickets in many countries

5. New Revenue: Charge service fees (airlines stopped commissions)

6. Additional Services: Insurance, guidebooks, car rentals, currency exchange

7. Financial Protection: Surety bonded (IATA, ATOL, ABTA, ASTA)

8. Customer Role: Impartial advice (revived with low-cost airlines)

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Q2. Discuss the organization system of travel agency.

Travel agencies have two organization systems:

A. Types:

• Independent: Manager-owned, <5 staff

• Multiples/Chains: Owned by tour operators, high street locations

B. Success Principles:

• Quality customer service

• Cost control + motivated staff + word-of-mouth

C. Key Functions:

• Reservations, itineraries, fare calculation, ticketing

• Client communication, record keeping, complaint handling

D. Skills Required:

• Technical (CRS, fares) + Interpersonal (sales, advice)

• Managerial (finance, staff)

E. Customer Service Standards:

• Warm greeting, professional appearance, eye contact

• Prompt telephone response

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Q3. Write short notes on the functions of identified jobs.

Functions of Travel Agent Jobs:

1. Reservation Agent:

   • Making reservations

   • Planning itineraries (round-the-world)

   • Maintaining accurate records

2. Ticketing Officer:

   • Calculating fares/charges

   • Producing tickets

   • Explaining air fare conditions

3. Customer Service Executive:

   • Advising on destinations/resorts/airlines

   • Verbal/written communication

   • Handling complaints as intermediary

4. Agency Manager:

   • Staff management

   • Financial control (accounts, cash flow)

   • Ensuring stocked supplies/brochures

5. Sales Executive:

   • Closing sales using CRS technology

   • Matching client needs with products

   • Guiding through buying process

Commissions

Definition of Commission

• Commission is a fixed percentage of the main element of the price paid to the travel agent by suppliers.

• Commissions are not paid on the Tax component of the price.

Main Commission Sources (Principal Income)
Several areas pay commissions to travel agencies:

• Car rentals

• Cruise lines

• Hotels

• Railways

• Sightseeing tours

• Tour operators

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Air Travel Commission Changes

United States:

• Most airlines pay no commission at all

• Agencies add service fee to net price

Commission Reduction Timeline:

• 1995: North America - Caps introduced

  • $50 max on return trips

  • $25 max on one-way trips

• 1999: European airlines + Singapore Airlines (Asia) reduced/eliminated

• 2002: Delta Airlines → Zero commission (USA/Canada)

• Followed by: United, American, Continental, Northwest, US Airways, American Trans Air

Types of Agencies

UK Agency Types (3 Types)

• Multiples: National chains owned by international conglomerates

  • Example: Thomson Holidays (now TUI AG subsidiary - German multinational)

• Maniples: Smaller chains based in particular regions/districts

• Independent agencies

Key Trend:

• Large mass-market tour companies buy controlling interest in agency chains

• Vertical integration = Control product distribution

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US Agency Types (4 Types)

• Mega agencies:

  • American Express

  • American Automobile Association (AAA)

• Regional agencies

• Consortium agencies

• Independent agencies

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Independent Agency Characteristics

• Cater to special/niche markets

• Examples:

  • Upmarket commuter towns/suburbs

  • Specific interest groups (sporting events)

  • Football, golf, tennis enthusiasts

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Two Approaches of Travel Agencies

1. Traditional Out-bound Agency

   • Multi-destination

   • Based in originating location of traveler

   • Usually larger operators (e.g., Thomas Cook)

2. Destination In-bound Agency

   • Destination-focused

   • Based in destination location

   • Delivers local expertise

   • Usually smaller, independent operators

Travel Agencies in the 21st Century

Internet Impact on Travel Agencies

• General public access to Internet changed the industry

• Airlines and travel companies began selling directly to passengers

• Airlines no longer pay commissions to travel agents on tickets sold

Disintermediation Effect

• Since 1997, travel agencies gradually disintermediated

• Caused by reduction in costs from removing layers in package holiday distribution

• 2009 Market Decline: Dropped from $17 billion to $14.5 billion

Areas Where Travel Agents Still Dominate

• Cruise vacations: 77% of bookings through agents

• Packaged travel: 73% through agents

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Travel Agency Response Strategies

1. Own Internet Presence

• Created travel websites with detailed information

• Online booking capabilities

2. Major Online Travel Agencies (OTAs)

• Expedia

• Voyages

• Travelocity

• Orbitz

• CheapTickets

• Priceline

• CheapOair

• Webjet

• Hotwire

3. Global Distribution Systems (GDS)

• SABRE

• Amadeus CRS

• Galileo CRS

• Worldspan (Travelport subsidiary)

• Used for booking airlines, hotels, car rentals

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Hotel Booking Process Online

• Travel sites work with GDS, suppliers, hotels for room inventory

• Not instant confirmation for all hotels

• Instant confirmation marked specifically (varies by website)

• Customer contacted with confirmation result

Examples of Hotel Booking Sites:

• Expedia

• Orbitz

• World Hotel-Link

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Dynamic Packaging Advantage

• Travel agents use dynamic packaging tools

• Provide fully bonded travel (complete financial protection)

• Prices equal to or lower than public online booking

• Professional advice + financial protection

Review Questions - Answers

Q1. Find out the changes that are happening in tourism business.

Major changes in tourism business (book + 2025-26 updates):

1. Internet Disintermediation (since 1997): Airlines sell direct, no agent commissions

2. Zero Airline Commissions: Service fees introduced (US airlines since 2002)

3. Online Travel Agencies (OTAs) Boom: Expedia, Orbitz, Travelocity dominate bookings

4. Market Decline: 2009 drop from $17B to $14.5B due to direct sales

5. 2025-26 Trends:

   • Sustainability focus: Eco-tourism, climate roadmaps, slow/local travel

   • AI & Digitalization: Chatbots, dynamic pricing, demand forecasting

   • Changing patterns: Off-season travel, emerging markets (India/China middle class)

   • Agents adapt: Dynamic packaging, fully bonded travel at competitive prices

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Q2. Activity: Find out the sources of income for travel agency/tour operations.

Sources of Income for Travel Agencies:

Primary Sources (Traditional):

• Commissions (fixed % of main price, not tax):

  • Hotels (varies by chain/volume)

  • Cruise lines (highest rates, 77% bookings via agents)

  • Car rentals, railways, sightseeing tours, tour operators

  • Packaged travel (73% via agents)

Modern Revenue Streams:

• Service Fees: Air ticketing ($35 domestic/$50 international), flat fees

• Markups: Travel packages, tours, activities

• Ancillary Services:

  • Travel insurance (commissions/markups)

  • Currency exchange

  • Airport transfers, event tickets

  • Travel gear/accessories

Digital/Other Income:

• Online Platforms: Affiliate marketing (Expedia links), advertising

• Group Travel: Discounts + management fees

• GDS Incentives: SABRE, Amadeus overrides

• Investments: Interest, dividends, rentals