Fundamentals of Travel Agency and Tour Operation Business MODULE – 6A
Travel and Tour Operation
Bussiness
20
FUNDAMENTALS OF TRAVEL Notes
AGENCY AND TOUR OPERA-
TION BUSINESS
Travel industry has grown at a great pace with the changing consumption
patterns across the globe. The role of intermediaries in this industry has been
vital in bridging the gap between demand and supply and tourists and
destinations. More importantly, travel agents and tour operators play a major
role in distribution of tourism services. This chapter aims to facilitate learners
in understanding the basics of travel agency and tour operations with
comprehensive inputs on concepts, types, differences between travel agency and
tour operators and also the interrelationship between them.
OBJECTIVES
After studying this lesson, you will be able to:
z define the meaning of travel agency and tour operation;
z discuss the concept of retailing and wholesaling;
z identify the types of travel agents and tour operators and
z differentiate between a travel agency and tour operators.
20.1 MEANING OF TRAVEL AGENCY AND TOUR
OPERATION
Both travel agency and tour operators, are intermediaries who bring together
clients and principal service providers and strengthen the selling and buying
process in travel industry. Conceptually they are different from each other.
Hence, it is important to have the conceptual understanding of these two.
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Bussiness A Travel Agency is a business which makes arrangements for peoples’ holidays
and journeys by booking their tickets, hotel accommodation or providing allied
facilities to them.
20.1.1 Travel Agency
Travel agency is an organised service provider in the travel industry. It means
a travel agent is responsible for organising travel. It provides a link to the
Notes suppliers of services with the tourists. It acts as a retail store for both suppliers
and clients. It plays the role of an active connector for delivery of end service.
Thus a travel agent can be considred to be a useful intermediary (retailer) as
he has accumulated knowledge expertise and contacts with providers (wholesaler)
of services. Look at the following example to demonstrate business of a travel
agency:
Mr. Pinto wants to go on a holiday trip to Goa. He visits a travel agency for
his travel requirements. He seeks the services of this travel agency for
consultancy, booking his air tickets, booking a hotel room and a car for local
sightseeing in Goa. The travel agency meets all his requirements by booking air
tickets, hotel and transport etc. Though it looks as if the travel agent is only
providing services to the tourist, but actually he is also serving the airline, hotel,
car rentals etc. In this case the travel agency has provided business to the supplier
as well as service to the tourist.
Thomas Cook was the first organised travel agent in the world and he also
invested in travel business. He commenced business in the United Kingdom
in 1841. The people boarding the train at Leicester station for Lough
Barough thought that they were only going on a good day out. For the
majority of the 570 people it was a day to relax. Little did they know that
they were taking part in history, as part of Thomas Cook’s first excursion
in 1841.
In the year 1880, within a short period of ten years it became customary
for a larger social group to spend holidays away from home. In 1851, Cook
was offered a great opportunity of conducting excursion trains. He
transported 16,500 people to and from Crystal Palace. He started organising
circular tour to the continent.
In the year 1880, his son, John Mason Cook came to India and established
his office in Bombay (now Mumbai) and then in Calcutta (now Koltkata).
Taking advantage of nineteeth century advances in transport technology
and hotel business, he started his India operation in 1881.
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Travel and Tour Operation
Bussiness
Nothing had happened like it before firstly in England and later in India.
Today we take organised travel for granted but Cook’s approach was
revolutionary. He went to Liverpool before the trip and checked hotel
accommodatoins and resturants to ensure that his 350 excursionists had
the best possible service. The inclusive tour, in which everything is paid
for in advance was also a creation of Cook as well as the Circular Note,
the forerunner of the traveller’s cheque which he created in 1873.
Notes
Today it is one of the world’s leading leisure travel groups with sales of
£ 9.8 billion, 23.6 million customers, 31,000 employees, a fleet of 94
aircraft, a network of over 3,400 and a number of hotels and resort
properties. The Group operates under six geographical segments in 22
countries, and is number one or two in all its core markets.
In the present world, with the growing competition in the travel industry, travel
agencies are also selling their own tour packages apart from the packages of
tour operators.
INTEXT QUESTIONS 20.1
1. What is meant by a travel agency?
2. Why are travel agencies and tour operations called intermediates?
20.2 TYPES OF TRAVEL AGENCIES
There are two types of travel agencies viz., retail travel agency and wholesale
travel agency.
Retail Travel Agency
A retail travel agency acts like any other retailer selling tourist products directly
to the tourists on behalf of the supplier and gets commission for selling.
Commission is the main source of its revenues. A two way selling method is
also practised which is on commission and mark-up price. A marked-up price
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Bussiness refers to marking-up of the cost of the tour and selling it on a higher price. The
difference between retail price and the wholesale cost is known as mark-up price.
A retail travel agency is defined as ‘a business that performs the following
functions: quotes fares, rates, makes reservations, arranges travel tickets and
accommodation, arranges travel insurance, foreign currency, documents and
accepts payments.’
Notes The role of retail agencies has become even more crucial as most principal
service suppliers get their products promoted, pushed and sold through retailers
in order to have a better market reach.
Wholesale Travel Agency
A wholesale travel agency, unlike retail agency, assembles various components
of services to form packages. Later, it depends on retailers to market and sell
its products to the tourists. It may also directly sell to the customers through
its own retail outlets. It buys service components in bulk from different suppliers,
designs, packages and sells or resells these components. Wholesale travel agency
specialises in designing and selling package tours.
It generates revenues through volume discounts from principal services providers
such as hotels, airlines, railways, car rentals, ground handlers etc.
A wholesaler doesn’t earn on commissions but through discounts on bulk
reservations from primary or principal suppliers. There is always an element of
market risk as it blocks seats in airlines, or rooms in hotels in bulk and might
make partial advance payments.
Other than the regular services, it also renders services like consultancy, travel
documents processing, currency exchanges etc. for its clients.
ACTIVITY 20.1
Study the profile of one retail and one wholesale travel agency and find out their
services and differences in them.
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INTEXT QUESTIONS 20.2
1. Mention the two major types of travel agencies?
2. What is meant by a retail travel agency?
3. What is mark-up price? Notes
4. What is a wholesale travel agency?
20.3 TOUR OPERATORS
A tour operator buys (or owns in some cases) a high volume of travel services
across carriers, accommodation and services. These services are then assembled
into packages for purchase by the consumer. The packages are sold via travel
agents (independent or owned) or through the phone and internet.
Given the scale at which tour operators buy, and the volume of their business,
it is extremely unlikely to be an option for a start-up company.
A tour operator is, hence, an organisation, firm or company who buys travel
components from different service providers, combines them into tour packages
and gives them its own price tag and then sells either on its own directly to
clients or through other intermediaries such as retailers. Unlike wholesale travel
agent, here the tour operator is wholly responsible for delivering and performing
the services specified in a given tour package. In most cases, they have certain
services of their own such as hotels, cars, coaches, currency exchanges etc. Tour
operators cater to a large market and have a range of package tours for different
segments. Thus, tour operators are recognised as manufacturers of package tour
holidays.
20.3.1 Types of Tour Operators
Tour operators can be classified on the basis of nature of tour, business and their
area of operation of package tours. This helps in understanding the difference
of meaning and function of each category. Thus, the classification includes
inbound, outbound, domestic and ground operator.
Inbound Tour Operators: Inbound tour operators are those operators who
handle inbound foreign tourists in the host country, provide them various
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Bussiness services on their arrival and departure such as transfer, accommodation,
transportation, sightseeing, entertainment, currency, insurance services etc. They
are also called as incoming tour operators as they specifically operate for
handling incoming foreign tourists or guests.
For example, a group from France comes to India and it is handled by XYZ
Travels in India for all their travel requirements mentioned in tour package. Here
Notes XYZ Travels is an inbound tour operator.
Inbound tour operators design and make tour packages individually or in
collaboration with foreign tour operators. The packages may be marketed
directly or through intermediaries. In fact, inbound tour operators are the ‘image
builders’ of a country as they convert all touristic resources of a nation into a
saleable commodity.
They also contribute valuable foreign exchange earnings to the economy of host
country. Recognising the vital role played by inbound tour operators in the
healthy growth and promotion of tourism, governments are encouraging them
by giving financial and tax concessions.
Outbound Tour Operators: They operate package tours to foreign countries/
overseas from a host country. These operators are specialised in promoting and
designing multi-national tours. The outbound tour operator sells a package tour
to an individual or a group of people of his own country to another country
or a number of countries for a specific pre-decided period and destinations.
The outbound tour operator arranges travel documents, transportation to a
central point where the tour starts and contracts with inbound tour operators/
ground operators to provide accommodation, transportation, local sightseeing
and other services as needed throughout the tour.
Generally, these operators work in liaison with the inbound tour operators/
ground operators and offer services involving meeting inbound tour group at
the airport, transferring the tour group from the airport to the arranged place
of accommodation in town hotel, arranging/organising local sightseeing that may
be a single day or multi days tour of the home state, region or area. These may
be in the form of business or leisure oriented tours.
For example, a group of tourists want to visit Singapore. They buy a tour package
from XYZ India. This tour operator does all the travel document processing for
the group and sends the group to Singapore and takes care of all the needs till
the tour is completed. Here, XYZ India is an outbound tour operator.
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Domestic Tour Operator: Domestic tourism in India is scaling up enormously. Bussiness
Domestic market has witnessed attractive growth rates as large players in the
travel industry are aggressively entering and promoting this market. Leading
tour operators usually focus on the international market where margins are
higher but now, in addition, they are floating new packages to create a niche
in this segment to tap the vast potential in the domestic market.
Generally, domestic tour operators operate within the boundary of home country Notes
and cater to the diverse needs of individuals and group travelers. They promote
tour packages both through their own outlets and other retail travel agents. In
fact, they are contributing to the cause of national integration and balanced
regional economic growth.
For example, a group of tourists from Chennai wants to visit Amarnath as part
of pilgrimage. They buy a pilgrimage package tour from Southern Travels. This
operator organises the complete tour for these Chennai tourists. Here in this
case Southern Travels is a domestic tour operator who operates within the
boundaries of the country for the visitors of the same country.
Ground Handlers/Operators: Ground operator is also referred to as, ‘reception
operator’, ‘destination management companies’, ‘reception operator or ‘handling
agencies’. These operators are generally expected to provide ‘land arrangements’
at a particular destination. Thus, a ground operator who provides the services
required by large tour companies where they do not have a local branch/office
or are not dealing at the source with the principal suppliers such as hoteliers,
transport operators, car rentals, entertainment organisations and so forth.
The reception operator secures, coordinates, supervises and handles accounts/
payments of all services related to the tour in his region/area. His services are
invaluable for an efficient and successful operation of inclusive group as well
as foreign independent tours.
ACTIVITY 20.2
Visit a travel agency or tour operator’s office/counter in your locality and find
out what type of services they provide. Identify their type, mode of operation
and relate it to your understanding of the a travel agency/ tour operator.
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INTEXT QUESTIONS 20.3
1. Who is a tour operator?
2. Mention the different types of tour operators?
3. What is the difference between inbound and outbound tour operators?
4. Who is a domestic tour operator?
Notes
5. List some of the ground services.
20.4 DIFFERENCE BETWEEN TOUR OPERATOR,
RETAIL AND WHOLESALE TRAVEL AGENCY
Tour Operator
z Is a wholesaler
z Is a principal agent or foreign travel agent
z Creates its own new products, designs new tour packages as it has its own
resources
z Amends the tour itinerary and programme
z Prepares delightful and value added tour itinerary
z Is located in mega cities
z Arranges International transfer from hotel to airport and vice-versa
z Plans adequate excursion tours
z Has foreign currency exchange facilities
z Generate new ideas and attractions in the package
z Is more inclined to perform ground handling services
z Offers variety of travel programmes/services
z His size of business, operational area and multi-service capacity is high
Retail Travel Agency
z Works as a retailer and sells package tours on behalf of the wholesaler
z Is an intermediary between tour operators and tourists
z Follows tour itenerary
z Plans sightseeing tours and excursion tours, airport transfer, check in and
check-out time in the hotel
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z Acts as a local agent to confirm and reconfirm the services Bussiness
z Works on commission from principal suppliers
Wholesale Travel Agency
z Does not sell package tours directly to clients
Notes
z Makes bulk purchase of services and assembles them to sell as package tours
z Is less inclined to perform ground services
z May deal with one specialised component of a travel product
z Size of business, operational area is limited and multi-service capacity is low
It is a difficult task in the present industry scenario to identify an individual
operator with a single category of operations. They act as retail agents,
wholesalers, tour operators, specialty channelers and also as general sales
agents. Thus the scope of modern travel agency activities is difficult to limit
and confine to one unit of classification. This is very well visible in the operations
of most travel companies in the country today. Yet differentiation helps in
understanding the fundamental characteristics of the categorisation.
ACTIVITY 20.3
Visit any travel agency websites and note all the services offered by the company.
Compare these services with the services being offered by another travel agency.
Online Travel Agency
OTA or Online Travel Agency is a typical travel agency resembling an
offline travel agency in all its services but operations on the internet through
a website connected to a global distribution system. There is an increasing
demand for online services these days as the cyber population is increasing
at a great scale. The OTAs apply the operational mechanisms of
e-commerce and transact online with their customers.
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Bussiness OTAs offer information, bookings of hotels, cars, reservation of seats in airlines,
railways, ships and buses, sell package tours, customise tours, take enquiries
etc. Transaction of payment is also done online using online payment modes
such as credit/debit cards, internet banking etc.
INTEXT QUESTIONS 20.4
Notes
1. Who earns more revenues on commissions: a tour operator a wholesaler?
2. List any two differences between a tour operator and a retail travel agency.
3. Mention any two important features of a Wholesale Travel Agency.
WHAT YOU HAVE LEARNT
z There are two types of travel agencies viz., retail travel agency and wholesale
travel agency.
z Both the travel agencies as well as tour operators act as intermediaries. They
strengthen the buying and selling process in travel industry. Just as there are
two types of travel agencies i.e. the Retail Travel Agency and Wholesale
Travel Agency, the tour operators can also be classified into four categories.
They are:
(i) Inbound Tour Operator (ii) Out bound Tour Operator (iii) Domestic Tour
operator and (iv) Ground Handlers/operators.
z Tour operators can be classified on the basis of nature of tour, business and
their area of operation of package tours. This helps in understanding the
difference of meaning and function of each category. Thus, the classification
includes inbound, outbound, domestic and ground operator.
z A tour operator buys (or owns in some cases) a high volume of travel
services across carriers, accommodation and services.
TERMINAL EXERCISE
1. What is meant by a travel agency and a tour operator?
2. Who are inbound, outbound, domestic and ground operators? Explain with
examples.
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3. Differentiate between retail and wholesale travel agencies from the tour Bussiness
operators?
4. List out ground services and mention how they play an important role in
travel industry.
ANSWER TO INTEXT QUESTIONS
Notes
20.1
1. A travel agency sells packages of wholesaler and earns revenues through
commission, acts like a retail store for travel services.
2. Both are called intermediaries because they bring together clients and
provide principal services and strengthen the selling and buying process both
for the customer as well as the hotels.
20.2
1. A Wholesale Travel agency and a Retail Travel Agency.
2. It sells tourist products directly to the tourists.
3. The difference between retail price and the wholesale cost is known as mark-
up price.
4. It buys service components in bulk from different suppliers, designs,
packages, sells and resells them.
20.3
1. A tour operator, is an organisation, firm or company who buys travel
components from different service, providers them into tour packages and
gives them its own price tag and then sells either on its own directly to clients
or through other intermediaries such as retailers.
2. Domestic, inbound, outbound and ground operators.
3. An Inbound operator handles foreign tourist and outbound operator handles
tourists going to foreign countries from a host country.
4. Operates within a host country and handles domestic tourists.
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Bussiness 5. Local transport, instructors, guides, events, car rentals, entertainment
services etc.
20.4
1. A retail travel agency earns more revenue on commission.
2. Tour Operator Retail Travel Agency
Notes (i) It is a wholesaler (i) It works as a retailor
(ii) It creates its own products (ii) It follows tour itinery and as
such as intermediary
(iii) It is located in mega cities (iii) It may be any where in small
towns, sub-towns and cities.
3. (i) It does not sell package tours directly to clients.
(ii) It makes bulk purchase of services and assembles them to sell into
packages.
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