Ideas & Opportunities

A travel agency goes beyond offering tour packages. Efficient coordination, thorough research, and excellent service are needed to run the business.

According to the Department of Tourism (DOT), visitor arrivals in the Philippines reached 3.917 million in 2011, exceeding the government’s target figure of 3.7 million for that year. This number is expected to go even higher this year, thanks in part to active promotions at trade fairs and road shows, both local and international.

With a growing market, a travel agency is a viable, moneymaking venture. You can operate one on a full-time or part-time basis, at home or in a commercial space. This business, however, is most suitable for those with a knack for organization and enough patience to conduct extensive research for great deals.

If you book “at least three to four group tours in a month, you are almost sure to make a profit,” points out Greenie Dee, executive vice president of Pan Euro International Inc. The company, which is based in Ermita, Manila, caters to about 1,000 clients a year.

Like most businesses, it’s important for a travel agency to offer value for money. “People are looking for the most affordable tour packages, and at the same time, the best services they can get. When you put these two together, people will definitely come back to you,” says Noilyn “Jojo” Estillore-Pinzon of Pink Suitcase Travel and Tours, located in Cainta, Rizal.

What are the other essential concerns in putting up a travel agency? Dee and Pinzon share some advice:

Investment cost. You’ll need to spend around P50,000 to P100,000 to initiate operations. But if you’re planning on a corporation or partnership, a minimum of P500,000 working capital is needed.

Space. When choosing a location, always think about your clients. “It is advisable to have a space and location that’s safe and accessible to your clients,” Dee advises.

A 10 to 15 square meter space is enough for a home-based travel agency, but a commercial location is the more advantageous choice because it will allow you to get walk-in customers, Pinzon says. A commercial space could measure 60 to 200 sq m, depending on the range of services you intend to offer and the type of clients you want to serve.

“Office rental ranges from P20,000 to P40,000 for a 50 to 70 square meters in Manila. The Makati area is normally pricier,” Pinzon notes. Landlords usually ask for three to six months’ worth of advanced deposits for rent and utilities.

Furniture and equipment. Computers with a reliable centralized reservation system (CRS) such as Amadeus, Abacus and Galileo are a must for travel agencies. CRS is used by travel agents for bookings and reservations, complemented by a fast and reliable internet connection.

Have at least two telephone lines and a fax machine. An office mobile phone is advisable to save on communication costs. “Some clients also find it more convenient to communicate by SMS,” Dee explains.

You also have shell out money for office furniture and equipment such as desks, chairs, storage cabinets, printers, a vault, and a photocopying machine.

You may hire fresh graduates, but it’s more beneficial to get those who studied tourism because they already have formal training in reservation and ticketing using the CRS. Another option is “to get people with experience in travel-agency operations,” says Dee.

Minimum wage is the norm for entry-level employees, but salary grades differ, depending on years of experience in the field. As for commission schemes, Dee says it depends on “management’s discretion,” but Pinzon thinks it should be implemented “as the business grows.”

Legal assistance. Get a lawyer on retainer “in case legal issues concerning government agencies and clients arise,” Dee advises. Sure, professional fees are costly, but they might be less expensive in the long run compared to addressing problems like collection delays and payment defaults, she says.

Marketing. The breadth of your client base is directly proportional to your marketing skills. Traditional media such as print ads, as well as TV and radio spots are good channels, as long as you have the budget. The internet also offers attractive and cost-effective options, such as e-mail blasts and social media sites like Facebook and Twitter. Pinzon contends, however, that the most effective advertising tool is still the one with the most personal touch: word-of-mouth endorsements. That’s why it’s important “to make sure your clients are always satisfied,” she adds.

Vacations, especially those that entail flying, are the stuff of dreams, and that’s why people are willing to save up and spend for them. To benefit from this, a travel agency must look for the best deals from airlines and suppliers such as hotels and resorts. Being a canny negotiator is key: your ability to haggle will allow you to offer great rates to clients.

Offer choice destinations. “We choose several popular destinations and new ones that have potential. We combine the cost of airfare to the land cost from suppliers, then [that info goes] into the flyer,” says Greenie Dee of Pan Euro International. Filipinos favor Asian holiday hubs such as Hong Kong, Singapore, Malaysia and Thailand because traveling to these areas isn’t that heavy on the pocket. Interest in Europe, however, has risen among Filipinos in recent years. On the other hand, foreigners in and traveling to the Philippines prefer tour packages bound for lush natural locales such as Boracay, Palawan, Bohol and Cebu—local getaways that’s also popular among Pinoys.

Pick your suppliers. Jojo Pinzon of Pink Suitcase Travel and Tours gauges client demand to determine its partnerships with airlines, hotels, resorts and bus operators. “We usually take advantage of promo packages. You should consider client convenience, affordability, and most importantly, profitability,” Pinzon says. But don’t let the low costs dazzle you too much because in this business, a good name goes a long way. “Deal only with reputable, long-established, and experienced partners,” Dee advises.

Pinzon also points out that you shouldn’t spend too much time coordinating travel packages. Don’t forget: you have other business functions to attend to, so manage your time.

Make your presence felt. Dee actively participates in conferences and trade shows to broaden her network. “Sometimes, we introduce ourselves through e-mail. Mostly, we get contacts from foreign conferences and trade shows as well as through industry recommendations,” she reveals.

Profile your clients. Consider the profile of your clients when putting a package together. Do you have individual customers or group bookings? The bigger the group, the cheaper the rates should be. You must also know your client’s budget and from there, offer the most attractive and reasonable rates. “We also monitor what rates the market and other travel agencies offer,” says Dee.  

CASH IT IN

The profitability of a travel agency largely depends on the volume of clients and the range of services it offers. The more services you provide, the more clients you are likely to attract. Start-ups can expect to earn a minimum of P10,000 a month during lean times and at least P30,000 during peak seasons.

Income generators such as mark-ups for airline tickets and commissions from tours range from 3 to 10 percent, depending on the time spent on processing the service. If you have the machinery, offer passport and visa assistance. Some even offer help in getting authentication of official documents from the National Statistics Office. NSO-approved certificates are a usual requirement in passport and visa applications. “Our services rates are based on percentage of the price of the services rendered,” says Pinzon.

Aside from individual clients, Dee also targets corporations and schools for group bookings. Your Web presence makes bookings convenient for clients, but make sure to entertain walk-in clients who saw your ads or were referred to you as well.