Every great travel company has to determine what type of travel company they want to be. Below we discuss the different ways travel is sold and the associated business operation name/description.
1.) Tour Operator – Traditional company that contracts hotel rooms, transportation, and additional excursions/events for its guests. Tour operators market directly to their guests and allow travel agents to re-sell their tour packages for a commission. The tour operator is the vendor and the travel agent is the sales agent selling to the general public. Start-up capital needed – minimum $20,000.00
2. Traditional Travel Agency – A traditional travel agency arranges travel for their guests and re-sell tour operators products. An example of a travel agency business model is Liberty Travel They re-sell prearranged hotel and flight packages arranged by tour operators. Traditional travel agencies normally sell face-to-face with their clients, over the phone, or via email. Start-up capital needed – minimum $6,000.00
3. Online Travel Agency and/or OTA – These agencies are 100% online. They contract hotels directly or through a third party wholesaler. They then use a direct connection with the airlines to package flights and hotels together. Typically they offer a contact/call center to aid people booking online, however in most cases they book 75% of their business online. Examples of this model include Expedia.com, Booking.com & CheapCaribbean.com. These companies started very small and have grown to be massive companies, and seem to be the largest sale of travel related products worldwide. Start-up capital needed – minimum $100,000.00
4. Travel Affiliate Programs – This is the newest model, with the least amount of capital required to start, and zero direct customer interaction. Online travel agencies and tour operators pay affiliate websites to advertise their travel deals/specials and when a potential customer visits the affiliate travel website and clicks on an offer, the tour operator or online travel agency pays the travel affiliate between $0.10 – $4.00 for the “click” when a potential guest leaves the affiliate site to be taken to the tour operator or online travel agencies website. Some tour operators and online travel agencies offer up to 10% commission if a guest gets to their websites via an ad they clicked on located on your travel affiliate site and completes and pays for a reservation. Start-up costs – $0 – $4000.00
We’re not partial to one model over any other. However we should point out that the affiliate model is the best way for someone with limited resources, who wants no customer service liability, a simple (nearly hands off) approach, and the fastest way to earn money. If money is your motivator and you want to earn it quickly, the affiliate model is the way to go.
In our next articles we’ll talk about developing your travel business idea and which of the four models might work best for you.