What is a travel agency?
A travel agency is a business that sells travel products to people on behalf of suppliers (also called principals): airlines, railways, bus and ferry firms, cruise lines, hotels, car rentals, guides and attractions.
The agent is a middleman. The traveller saves time and gets expert advice; the supplier gets customers without opening its own shop everywhere.
Types of agencies
- Retail travel agent: sells directly to the public from an office or phone.
- Tour operator (wholesaler): buys seats and rooms in bulk at low rates, puts them together as packages and sells through retail agents or directly.
- Online travel agency (OTA): website or app where travellers search and book themselves.
- Specialist or niche agency: business travel, pilgrimage, adventure, education trips, luxury.
- Inbound / outbound: inbound agencies serve visitors coming into a country; outbound agencies send residents abroad; domestic agencies handle travel inside the country.
Functions and services of a travel agency
- Information and counselling: destinations, best season, routes, costs, rules.
- Reservations and ticketing: air, rail, bus, ferry and cruise tickets, often through a computer reservation system.
- Accommodation booking: hotels, resorts, homestays with the right meal plan.
- Itinerary planning and packages: day-by-day trip plans and ready or tailor-made packages.
- Travel documents: guidance on passports, visas, health certificates and permits.
- Travel insurance: cover for illness, accidents, lost luggage and cancellations.
- Foreign exchange: currency and prepaid travel cards (through licensed dealers).
- Ground services: airport transfers, car hire, local guides, sightseeing.
- After-sales service: help with changes, delays, complaints and refunds.
How a travel agency earns and works
Income
- Commission: a percentage of the booking paid by the supplier (for example 5–10% on a hotel or package).
- Service fee: a fixed charge to the traveller for booking or advice.
- Mark-up: on packages, the agency adds a profit to its costs.
Agency income = booking value × commission % + service fee.
The booking workflow
- Enquiry from the traveller
- Counselling: understand needs and budget
- Quotation: send options and prices
- Booking with suppliers
- Payment and invoice
- Documents: tickets, vouchers, itinerary
- After-sales: support during and after the trip, feedback
Setting up an agency
An agency needs a registered business, a good location or website, trained staff, links with suppliers, and often approval from industry bodies (for example IATA accreditation to issue airline tickets, or a national tourism department's approval).
Key formulas and definitions
- Travel agent: middleman between traveller and suppliers (principals)
- Tour operator: builds and sells packages (wholesaler)
- OTA: online travel agency
- Commission = booking value × commission %
- Agency income = commission + service fee
- Workflow: enquiry → counselling → quote → booking → payment → documents → after-sales
- Inbound: visitors coming in; outbound: residents going abroad
Worked examples
1. A hotel pays 10% commission. The agent books ₹30,000 of rooms. What is the commission?
30,000 × 10% = ₹3,000.
2. A package worth ₹80,000 earns 8% commission plus a ₹1,000 service fee. Total agency income?
80,000 × 8% = ₹6,400. Income = 6,400 + 1,000 = ₹7,400.
3. A company buys 200 hotel rooms in bulk, adds flights and tours and sells holidays through shops. Is it a retail agent or tour operator?
A tour operator: it buys in bulk and builds packages, then sells through retail agents.
Common mistakes
- Thinking a travel agent owns the planes and hotels. It only sells on behalf of suppliers.
- Mixing up retail agents and tour operators. Operators build packages; retailers sell them.
- Forgetting after-sales service. The job does not end when the ticket is issued.
- Thinking the agent issues visas. Only the government issues visas; the agent only guides.