The Travel Agency and Wholesaler

Lecture Discussion

A travel agent is a person who has full knowledge of tourist product – destinations, modes of
travel, climate, accommodation, and other areas of the service sector. He acts on the behalf of
product providers/principles and in return gets a commission. Technically, a travel agent is
an owner or manager of an agency, but other employees are responsible for advising tourists
and selling packages tours/individual components of travel products.

A travel agent may be an individual /firm or corporation which is commonly known as a travel
agency. An agency means the office of travel agent or organization where all travel goods and
services are assembled and coordinated for the smooth conduct of travel agency business.

Travel agency is one of the most important organizations in the tourism private sector which
plays a significant and crucial role in the entire process of developing and promoting tourism in
the country or at a destination. It is a travel agency which packages and processes all the
attractions, accesses, amenities and ancillary services of a country and present them to tourists.
That’s why travel agency is known as ‘image builder ‘of a country.

A prospective travel agency is one which makes arrangements of travel tickets (air, rail, road,
and sea); travel documents (passports, visa and other documents required to travel);
accommodation, entertainment, and other travel-related services from principle suppliers. It
may also secure travel insurance, foreign currency for traveling people.

History of Travel Agency

The first Travel Agency of the world was established by Thomas Cook in 1845 in England.
The use of the term travel trade dates back from the early years of the 19th century, but this
should not obscure the fact that what we today describe as travel trade (travel agency and tour
operation business) was taking place much earlier in history.

Throughout history, there was travel middleman who helped the merchants traveling for trade
and others who traveled for religious purposes.

Four years later in 1845, he set up a ‘World’s First Travel Agency‘to organize excursions.
Due to this innovative approach, Mr. Thomas Cook is known as the Father of Travel
Agency Business. He coordinated railway and steamship excursions throughout England,
Scotland and Europe.

However, the railways only gave him a 5% commission which was not enough to meet his
overheads, so he decided to diversify this business into tour operation.

In 1855 Mr. Cook started operating package tours. He conducted the world’s first
international tour from England to Paris.

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Types of Travel Agency

Travel agencies are basically categorized into two types-: Retail Travel Agency
and Wholesale Travel Agency.

Retail Travel Agency

A retail travel agency sells tourists products directly to the public on the behalf of the
products suppliers and in return get commissions. Some package tour is sold in two ways i.e.,
on a commission basis and mark up the price.
When a travel agency sells a tour on the marked-up price it means that first, it markup
the cost of the tour and then sell it at a higher rate. The markup price is the difference between
retail price and wholesale cost.

Wholesale Travel Agency

These agencies are specialized in organizing package tours, which are marketed to the
customers/tourists through the network of a retail travel agency or directly to the prospective
clients (if wholesale travel agency has a retail division). A wholesale travel agency purchases
tourists’ product component in the bulk and designs tour packages.
Sometimes, a wholesale travel agency buys travel components from the vendor in bulk
and resell them to other travel business originations.
Wholesale travel agencies assemble package holidays and sell them to clients through retail
travel agencies. A typical package tour includes – air tickets, accommodation, and something
other services may also be included in it such as entertainment, sightseeing, and sports
activities, etc.
These packages are referred to as ‘package tours’ most of these tours include the
services of escorts but a few are sold to people who wish to travel independently.

Now a question arises – How a wholesale travel agency generates profits?

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 Generally, a wholesaler receives volume discounts from the principal suppliers because a
wholesaler might agree to purchase a large number of seats from a particular airline or reserve
a large number of rooms at a particular hotel or resort.

Practically, a wholesaler who sells package vacations/tours is called a Tour Operator.

However, technically there is a difference between a wholesaler and a tour operator. A
wholesaler who sells tourists products individually without assembling them into a package tour
is called a Consolidator.
Mostly, these are specialized in particular product components such as air tickets,
accommodation, and conferences, and conventions, etc.

Difference between Wholesale Travel Agencies and Tour operators

The wholesale travel agencies may offer or operate the package tours or may specialize in
developing tours for inbound as well as outbound travelers. They are often referred to as tour
operators, but these two essentially different:
1. Wholesale travel agency does not sell directly to the public, while tour operators do sell
directly to clients.
2. A wholesale travel agency usually combines, assembles and contacts for existing travel
services to formulate a new travel product she has his own one or more components of
travel product i.e. ‘inclusive tours.’
3. Wholesale travel agencies are less inclined than tour operators to perform ground
services i.e. handling agency or ground operators.
4. A wholesale travel agency may deal with one component of travel product while a tour
operator offers a variety of tour programs.
5. The size of the business is large in the case of tour operators in comparison to a
wholesale travel agency.
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Features and Importance of the Travel Agency

Travel agency plays an important role in the travel sector business. Some most important
features and importance of the travel agency business are following as:-

1. An important link between the clients and principal suppliers.

2. Image-Builder.
3. Ensures rapid travel services.
4. Provider of authentic and reliable travel information.
5. A social a continuous process.
6. Establishes a good relationship with clients and vendors.
These are the most important features of the Travel Agency Business.

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Functions and Services of Travel Agency

Today, Travel Agencies have been recognized as a vital component of travel and
tourism and have become an integral part of the travel and tourism industry at globally. They
account for more than 90% of international and 70% of domestic tourist traffic
Further, more than 60% of all travel agency revenues are derived from business travel. Most
travel agencies sell both commercial and leisure travel but there are many travel agencies that
only specialized in one sector or the other.

Travel Information

Whatever the size of a travel agency, it has to provide necessary travel information to tourists.
A travel agency must give up-to-date, accurate, and timely information regarding destinations
mode of travel, accommodation, sight-seeing, shopping, immigration, passport, visa, customs
clearance and procedure, health and security rules, and various permits required to travel in
particular areas, etc.

Itinerary Preparation

The term tourist’s itinerary is used to identify the origin, destination and all the stopping points
in a traveler’s tours. It is a composition of various elements and designed after a detailed study
of the market. Travel agencies prepare an itinerary for tour packages.

Airline Ticketing and Reservation

A travel agency sells a variety of tourism products. Airline ticketing and reservation is still a
major source of revenue. Travel agencies perform a function of airline ticketing and reservation
on behalf of various airlines.

Tour Packaging and Costing

Travel agencies prepare a tour package and sell them to tourists. The costing and pricing of
tour packages depend to a large extent on the ability of travel agents as to how effectively he is
able to negotiate with the principal suppliers.

Reservation

It is a very important function of all types of travel agencies. A travel agency consistently makes
linkage with the accommodation sector, transport sector and other entertainment organizations
to reserve rooms, and seats in the cultural programs and transportation.

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Travel Insurance

Some large-scale travel agencies perform additional functions to serve their clients. Travel
insurance protects travelers against the person as well as baggage losses resulting from a wide
range of travel-related happenings and problems.

Currency Services

Approved travel agency authorized by Govt. body provides currency exchange services to
tourists.

Organization of Conference/Conventions

Large-scale travel agencies offer a complete convention/conference package which includes

registration of the participants at the venue to be picked up for dropped to the airport/hotel,
overhead projectors, slide projectors, TV, VCR, information counter, sightseeing, etc.

Nature and role of intermediaries

An intermediary (or middleman) can be defined as follows: 'a firm or person (such as a broker
or consultant) who acts as a mediator on a link between parties to a business deal, investment
decision, negotiation, etc'.

Essentially, an intermediary act as a middleman between the supplier (airline, hotel, service
provider or tour operator) and the consumer (the tourist).

For the travel and tourism industry, traditionally this role is performed by the travel agent,
'providing an outlet for the actual sales of tours, tickets and travel services, such as travel
insurance or foreign exchange, to the public'.

Suppliers pass on the products or services to the travel agents, who then sell these products on
to consumers, in return for a fee for each product they sell. This is called a commission, which
is normally a pre-agreed percentage 'ranging from 7 per cent (%) to 40 per cent' (Syratt,
2003:168), depending on the relationship between the supplier and the travel agent and the
volumes of products sold.

Disintermediation

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In recent years, more suppliers sell more products direct to consumers, bypassing the
intermediary in the supply chain. This is 'disintermediation' in practice.

Types of travel agencies

As intermediaries, travel agencies provide consumers, tourists and travelers, with tourism- and
traveler elated products and services.

In recent years, there have been changes to the structure of the retail travel industry with the
growth in options available to the consumer wanting to purchase travel products. The options
are summarized in the diagram that follows, with details of how each serves the market in the
table beneath.

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 Specialist Specialize in particular types of holidays (Special Interest Tourism – SIT) ƒ
Generally independents or maniples Example: STA Travel which specializes in
travel for students and young people (www.STATravel.co.uk)
Travel agencies as commercial entities may be traced back to the nineteenth century. The first
independent travel agencies offered travel tickets for rail, sea and land travel with
accommodation on a commission basis for each sale (Page & Connell, 2006).

The number of travel agencies remained relatively constant during the first half of the twentieth
century, despite the emerging trend for air travel during the 1940s. In the 1960s commissions,
licensing and closer relationships between airlines and travel agents (Page & Connell, 2006)
caused exponential growth in the tourism industry and the origins of the package holiday that
remains popular today.

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Tourism involves supplying the demand for travel. It is a complex industry, both multi-faceted
and multinational. As the diagram shows there is a complex distribution chain. Suppliers of the
basic elements needed to enable travel or create a holiday (whether a journey, a hotel room or

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insurance), may sell their products directly to consumers or onto brokers or wholesalers.
Wholesalers may combine the elements into a 'package', (a combination of transport,
accommodation and catering) or sell on individual elements to the retailers (travel agents). The
travel agent then sells the product on to the consumer (the tourist/traveler)

The following diagram shows that there are four ways in which a consumer may purchase
tourism products:
• Information Communications Technology (ICT) – the Internet
• Travel agent
• Tour operator
• Regional Tourism Organization (RTO) using a Destination Management System (DMS)