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Module 10: Tourism - Retail Travel Sales

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Tourism – Introduction to Retail Travel Sales
Retail Travel Agencies

Introduction
Retail travel agents are the most important travel intermediary. They act as sales outlets for suppliers and wholesalers from whom they receive commission for any sales made. They also act as travel counsellors, advising people on when, where and how to travel.

Historical Development
It is commonly agreed that Thomas Cook was the first travel agent. Cook began packaging domestic tours in his native England in 1841. In 1850 he began offering tours of Europe and by 1866 he was offering tours of the USA. In 1872, he escorted a group of travellers around the world. This trip is said to have inspired the Jules Verne novel Around the World in 80 Days.

The first travel agencies in the USA began appearing in the early 20th century. Initially, travel agencies were desks in hotels that were serviced by the hotel porter. Railway operators would supply the hotel with tickets and the hotels would receive a commission for each ticket sold. In the late 1920s, airlines also began supplying these desks with tickets and provided a 5% commission.

As air travel expanded, travel agencies began appearing in American hotels and high streets. However, the link between airlines and travel agencies was so strong that, until 1959, travel agencies had to be sponsored by an airline in order to operate legally.

Historical Development
Following World War II, there was a huge growth in the number of travel agencies in the USA and Europe. A recovering global economy and the increased affordability of air travel ensured a huge increase in the number of business and pleasure travellers. As the number of service providers and travel routes increased so did the demand for travel agents. Travellers now felt that they had neither the time nor the expertise to make their own travel arrangements and sought the advice of experts.

Following airline deregulation of the US airline industry in 1987 the number of travel agencies in the country doubled. Similarly, the deregulation of airlines in the EU in 1993 greatly increased the number of travel agencies. However, internet retail has greatly affected travel agencies in recent years. Many small, independent travel agencies are closing their offices while larger agencies are downsizing their retail locations.

Regulations Governing Travel Agencies
No formal education is needed to become a travel agent. However some agencies prefer that their employees have some qualifications. Many universities offer degrees and certificates in tourism and hospitality.

Industry groups such as the Institute of Certified Travel Agents (ICTA) and The American Society of Travel Agents (ASTA) also offer certificates.

Regulations Governing Travel Agencies
To open a tourist agency in Europe, a company must obtain a travel retail licence. In the USA, the process is much more complicated. An agency may or may not need a licence, depending on the laws of the state in which they intend to operate. However, all travel agencies must be certified by four industry associations in order to legally operate. Industry associations are groups that represent the interests of companies in the travel industry. The companies that they require certification from are as follows:
Airline Reporting Corporation (ARC)
International Airlines Travel Agent Network (IATAN)
Cruise Lines International Association (CLIA)
National Railroad Passenger Corporation (Amtrak)

Regulations Governing Travel Agencies
Each industry is made up of companies that sell a particular travel service. The ARC represents the interests of domestic airlines. The IATAN’s members are made up of international airlines. The CLIA’s represent cruise liners and AMTRAK represents the interests of the US rail industry. Normally, an agency will apply for an ARC certificate first. Once an ARC certificate is issued the others usually follow as a matter of due course. It can take up to two years to be accredited by the ARC.

Regulations Governing Travel Agencies
To receive an ARC appointment an agency must:
• be open for business and actively selling air tickets. Prior to receiving approval, tickets are pre-purchased from airlines and then sold to customers. After approval has been granted, commissions are received retroactively.
• be managed by someone with a minimum of two years' experience in selling tickets and one year's experience in issuing tickets.
• be visible from the street, clearly identified as a travel agency and easily accessible to the general public.
• have a minimum bond of $20,000 and a cash reserve of at least $25,000. The cash reserve is necessary to sustain the business while they are awaiting accreditation.
• be actively involved in promoting travel.

Income
Retail travel agents’ income comes from commissions paid by suppliers and tour wholesalers. A commission is a percentage of the total sale. The traveller does not pay for the services of a travel agent. Rather, the service provider or wholesaler incurs the cost of the commission fee. When the travel industry was regulated in the USA and Europe the governing body of each state/country decided what percentage of each sale would be paid as commission.

Since deregulation, service providers and wholesalers can negotiate commission rates with each travel agency. Often, tour wholesalers will offer agencies a progressive commission rate i.e. the percentage of the commission rises along with the number of packages sold. Such agreements help to motivate travel agents to sell products for a particular company.


Income
On average, almost 60% of the average travel agencies’ income comes from commissions for air travel. The average commission received from airlines is 10%. Cruise lines offer an average rate of 16% commission. Hotels usually offer 11% commission while the average rate for car rental companies is 8%. Commissions rates from package tours are anywhere from 11% to 22% depending on the agreement between the wholesaler and the tourist agency.

Customer Protection and Liability
Travel agents must remember that they can be legally held responsible for their actions in running their business. Since travel agents are considered “travel advisors” , rather than booking agents, they can be held responsible for the quality of their advice. Agents must take the age and health of the client into account when recommending a trip.

Travel agents must also make customers aware of the role of tour wholesalers/tour operators when selling package vacations. Situations have arisen where a customer buys a tour package through a travel agent and prior to the vacation the tour wholesaler goes bankrupt. Courts have ruled that when the customer is unaware of the existence of the wholesaler, the retailer is liable for the customer's loss. Agencies can protect themselves by dealing with reputable wholesalers, buying insurance, explaining the roles of intermediaries and by having travellers sign a disclaimer.


END OF UNIT:
Retail Travel Agencies

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