A travel agency is a retail business, that sells travel related products and services, particularly package tours, to end-user customers, on behalf of third party travel suppliers, such as airlines, car rentals, cruise lines, hotels, railways, sightseeing tours and tour companies. In addition to dealing with ordinary tourists, most travel agencies have a separate department devoted to making travel arrangements for business travelers, and some travel agencies specialize in commercial and business travel only. There are also travel agencies that serve as general sales agents for foreign travel companies, allowing them to have offices in countries other than where their headquarters are located.
The British company, Cox & Kings,is sometimes said to be the oldest travel agency in the world, but this rests upon 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 nineteenth century. Thomas Cook, in addition to developing the package tour, established a chain of agencies in the last quarter of the nineteenth century, in association with the Midland Railway. They not only sold their own tours to the public, but in addition, represented other tour companies. Other British pioneer travel agencies were Dean and Dawson, the Polytechnic Touring Association and the Co-operative Wholesale Society.
Travel agencies became more commonplace with the development of commercial aviation, starting in the 1920s. Originally, travel agencies largely catered to middle and upper class customers, but the post-war boom in mass-market package holidays resulted in travel agencies on the main streets of most British towns, catering to a working class clientèle looking for a cheap overseas beach holiday.
As the name implies, a travel agency's main function is to act as an agent, that is to say, selling travel products and services on behalf of a supplier. Consequently, unlike other retail businesses, they do not keep a 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. The 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. A British travel agent would consider a 10-12% commission as a good arrangement.
In some countries, airlines have stopped giving commission to travel agencies. Therefore, travel agencies are now forced to charge a percentage premium or a standard flat fee, per sale. However, some companies still give them a set percentage for selling their product. Major tour companies can afford to do this, because if they were to sell a thousand trips at a cheaper rate, they still come out better than if they sell a hundred trips at a higher rate. This process benefits both parties.
Other commercial operations are undertaken, especially by the larger chains. These can include the sale of in-house insurance, travel guide books and timetables, car rentals, and the services of an on-site Bureau de change, dealing in the most popular holiday currencies.
The majority of travel agents have felt the need to protect themselves and their clients against the possibilities of commercial failure, either their own or a supplier's. They will advertise the fact that they are surety bonded, meaning in the case of a failure, the customers are guaranteed either an equivalent holiday to that which they have lost or if they prefer, a refund. Many British agencies and tour companies are bonded with IATA for those who issue their own tickets, ATOL for those who order tickets in or ABTA, for those who sell package holidays on behalf of a tour company.
A travel agent is supposed to offer impartial travel advice to the customer. However, this function almost disappeared with the mass-market package holiday and some agency chains seemed to develop a 'holiday supermarket' concept, in which customers choose their holiday from brochures on racks and then book it from a counter. Again, a variety of social and economic changes have now contrived to bring this aspect to the fore once more, particularly with the advent of multiple no-frills airlines.
Most travel agencies operate on a commission-basis, meaning that the compensation from the airlines, car rentals, cruise lines, hotels, railways, sightseeing tours and tour companies is expected in form of a commission from their bookings. Most often, the commission consists of a set percentage of the sale.
In the United States, most airlines pay no commission at all to travel agencies. In this case, an agency usually adds a service fee to the net price.
There are three different types of agencies in the UK: Multiples, Miniples and Independent Agencies. The former comprises of a number of national chains, often owned by international conglomerates, like Thomson Holidays, now a subsidiary of TUI, the German multinational. It is now quite common for the large mass-market tour companies to purchase a controlling interest in a chain of travel agencies, in order to control the distribution of their product. (This is an example of vertical integration.) The smaller chains are often based in particular regions or districts.
Independent Agencies usually cater to a special or niche market, such as the needs of residents in an upmarket commuter town or suburb, or a particular group interested in a similar activity, such as sporting events, like football, golf or tennis.
There are two approaches of travel agencies. One is the traditional, multi-destination, out-bound travel agency, based in the originating location of the traveler and the other is the destination focused, in-bound travel agency, that is based in the destination and delivers an expertise on that location. At present, the former is usually a larger operator like Thomas Cook, while the latter is often a smaller, independent operator.
Travel consolidators or wholesalers are high volume sales companies that specialize in selling to niche markets. They may or may not offer various types of services, at a single point of access. These can be hotel reservations, flights or car-rentals, for example. Sometimes the services are combined into vacation packages, that include transfers to the location and lodging. These companies do not usually sell directly to the public, but act as wholesalers to retail travel agencies. Commonly, the sole purpose of consolidators is to sell to ethnic niches in the travel industry. Usually, no consolidator offers everything, they may only have contracted rates to specific destinations. Today, there are no domestic consolidators, with some exceptions for business class contracts.
Travel agencies have been accused of employing a number of restrictive practices, the chief of which is known as 'racking'. This is the practice of displaying only the brochures of those travel companies whose holidays they wish to sell, the ones that pay them the most commission. Of course, the average customer tends to think that these are the only holidays on offer and is unaware of the possible alternatives.
Conversely, by limiting the number of companies that a travel agency represents, this can bring a better and more profitable, working relationship between the agency and its suppliers. Travel agencies can then obtain special benefits for their customers, from a supplier, by concentrating their bookings with that supplier. Some examples of these special benefits would be room upgrades or the waiver of change and cancellation fees.
("Racking" is a British expression, not used in the United States.)
With general public access to the internet, many airlines and other travel companies began to sell directly to passengers. As a consequence, airlines no longer needed to pay the commissions to travel agents on each ticket sold. Since 1997, travel agencies have gradually been disintermediated, by the reduction in costs caused by removing layers from the package holiday distribution network.
Many travel agencies have developed an internet presence of their own by posting a website, with detailed travel information. Full travel booking sites are often complex and require the assistance of outside travel technology solutions providers such as Travelocity. These companies use travel service distribution companies who operate Global Distribution Systems (GDS), such as Sabre Holdings, Amadeus, Galileo and Worldspan, (now Travelport GDS ) to provide up to the minute, detailed information on tens of thousands of flight, hotel, and car rental vacancies.
Some online travel sites allow visitors to compare hotel and flight rates with multiple companies for free. They often allow visitors to sort the travel packages by amenities, price, and proximity to a city or landmark.
Travel agents have applied dynamic packaging tools to provide fully bonded (full financial protection) travel at prices equal to or lower than a member of the public can book online. As such, the agencies' financial assets are protected in addition to professional travel agency advice.
All travel sites that sell hotels online work together with GDS, suppliers and hotels directly to search for room inventory. Once the travel site sells a hotel, the site will try to get a confirmation for this hotel. Once confirmed or not, the customer is contacted with the result. This means that booking a hotel on a travel website will not necessarily result in an instant answer. Only some hotels on a travel website can be confirmed instantly (which is normally marked as such on each site). As different travel websites work with different suppliers together, each site has different hotels that it can confirm instantly. Some examples of such online travel websites that sell hotel rooms are Expedia and Orbitz.
Often tour operators have hotel contracts, allottments and free sell agreements which allow for the immediate confirmation of hotel rooms for vacation bookings.
Mainline service providers are those that actually produce the direct service, like various hotels chains/airlines that have a website for online bookings. Portals will serve a consolidator of various airlines and hotels on the internet. They work on a commission from these hotels/airlines. Often they provide cheaper rates than the mainline service providers as these sites get bulk deals from the service providers. A meta search engine on the other hand, simply culls data from the internet on real time rates for various search queries and diverts traffic to the mainline service providers for an online booking. These websites usually do not have their own booking engine.
With the many people switching to self-service internet websites, the number of available jobs as travel agents is decreasing. Most jobs that become available are from older travel agents retiring. Counteracting the decrease in jobs due to internet services is the increase in the number of people travelling. Since 1995, many travel agents have exited the industry, and relatively few young people have entered the field due to less competitive salaries. However, others have abandoned the "brick and mortar" agency for a home-based business to reduce overheads, and those who remain have managed to survive by promoting other travel products such as cruise lines and train excursions or by promoting their ability to aggressively research and assemble complex travel packages on a moment's notice, essentially acting as a very advanced concierge.