What is Travel Trade? History, Travel Agency, Tour Operators

  • Post last modified:19 January 2023
  • Reading time:24 mins read
  • Post category:Tourism

What is Travel Trade?

Travel Trade is a tourism term referring to tour operators, travel agents, receptive operators, and wholesalers. These professionals organize and contract to buy travel products to sell to groups or individuals.

The travel agency trade in India is about 60 years and has gained momentum from the growth of civil aviation in the country. Travel agency trade in India was a small start with a few firms, today it has about 750 approx. travel agencies spread all over the country.

The country is renowned for its uncertainties and it’s not easy to count out without any guidance. There in India travel agencies or tour operator emerges as a perfect travel companion chasing away the complexities and overcoming all hurdles and ensure you have a perfect traveling experience.

History of Travel Trade in India

People were not aware of the services of travel agencies and they used to face several types of difficulties to arrange tours on their own. Travel agents were appointed for the purpose of arranging logistics for the army personnel or reliefs for war victims.

They used to work providing postal and courier services to the government. The American Express Company celebrated its 150 anniversary in 2000 as a branded Credit Card and Traveler’s Cheque Company.

It has created its own niche in the credit card segment. Today, the company is the world’s largest wholesale travel agent and consolidator with provisions of travel solutions for flights, hotels, car rentals, holiday packages, cruises, and money exchanges to individuals, groups, and corporate travelers.

History of Travel Trade in India:

  1. Origin of Traveller’s Cheque
  2. Philanthropic Work
  3. Diversification of Business
  4. Acquisitions for Expansions
  5. History of Travel Agency Business in India
  6. Period of Pre Independence
  7. Period of Post Independence

Origin of Traveller’s Cheque

American Express is a global company serving the public as well as government agencies with its unique supply chain management system to deliver travel products freely at distance places for the last one and a half-decade.

Travelers are well-known and comfortable with traveler’s cheques issued by American Express from several locations around the world. It was a travel solution for long-haul travelers carrying money for spending on transport, accommodation, food, tips, and shopping.

There were two benefits for American Express Company:

  • It charged service charges for issuing cheques.
  • Money, which was deposited for issue of cheque, was invested for earning interest.

Traveler’s cheque business became very profitable for the company and it expanded its network across the USA and other European countries including the UK.

American Express Company became a popular and reliable agency for the general public and government for its Money Order as well as Traveler’s Cheque.

Philanthropic Work

The historic assistance of the American Express Company with its cheque became famous for the company to receive more acceptability.

The stranded passengers in European cities during the First World War were given cash against their traveler’s cheques and money orders instantaneously. It was a timely help for passengers that helped passengers spend on routine things.

Diversification of Business

Cargo and baggage handling and money exchange were the core business until 1915. A 30,000-mile world cruise tour connecting and stopping at different countries such as Cuba, Panama, Japan, China, Singapore, India, and Egypt along with the Mediterranean countries was conducted for passengers in 1922. The duration of the cruise tour was four-month-long.

The company also entered into the direct sale of bus, train, and cruise tickets. The diversification of business did not bring about visible changes in the business due to the political turmoil followed by two World Wars in a gap of two decades.

After the end of World War II, there were political unions across the world and many countries deeply realized the impact of wars on trade and commerce. Neighboring countries were engaged in dialogue for promoting trade and commerce.

That resulted in the movement of people from one country to another. American Express took the advantage of the mass movement of people in the early1950s and the business got revived. The first Credit Card was introduced in 1958.

As a result, credit cards were issued with easy formalities for the general public in America to use extensively. People took it as a status symbol and hassle-free way of purchasing and paying.

Acquisitions for Expansions

American Express went on acquiring companies that were directly and indirectly into the travel business. The names of the companies include Shearson Loeb Rhodes, First Data Resources, Trade Development Bank, Lehman Brothers, Kuhn Loeb, and Investors Diversified Services.

All the diversifications and acquisitions took place between the 1970s and 1980s. This had a significant impact on revenue generation. The profit reached the extent of $1 billion in 1986.

There was a setback to the company’s turnover when restaurant operators did not use the cards due to high rates for accepting the payments through the Amex cards.

The Company maintained strategic links with airlines, banks, retailers, and other tourism business establishments to expand the circulation of Amex Card.

History of Travel Agency Business in India

Travel agents were not merely meant for selling travel-related services but also used to take part individually or with groups for the promotion of tourism destinations.

International travel organizations like Thomas Cook, American Express, and Cox and King have made remarkable contributions to the growth of travel agencies and tour operation business. Those travel agencies brought several new ideas to the limelight.

Similarly, travel agencies in various countries followed and practiced innovative business strategies.

Period of Pre Independence

The evolution of modern travel agency and tour operation business in India does not have a long history unlike the history of travel agency business in Western Europe and North America. Overseas travel agents like Cox & Kings and Thomas Cook used to operate the inbound tour in India.

There was no formal travel agency in small cities to handle the foreign visitors. Thomas Cook & Cox and Kings used to conduct the world tour and special interest tours for royal family members. Package tours were regularly conducted to India for British officials and their family members and relatives.

Period of Post Independence

Some of the events during Post Independence Period opened opportunities for the travel agents to expand more functions. One such event is the report prepared by Sir John Sargent in 1945 about the development of means of travel from the nearest railway station, residential accommodation, travel brochures and guide books, provision of authorized guides, etc.

The formation of the Tourist Traffic Branch coordinated with the travel agencies and tour operators in India and overseas to promote domestic and inbound tourism in 1949. The branch also established coordination for the conduct of conferences on tourism and coordination with railways.

The establishment of the Tourist Bureau in States and development of tourist centers and the training of guides were some of the initiatives of the Central Government for the promotion of tourism.

Travel Agency

A travel agency is one of the most important organizations in the tourism private sector that plays an important and vital role in the entire process of developing and promoting tourism in the country or at the destination.

It is a travel agency that packages and processes all the attractions, accesses, amenities, and ancillary services of a country and presents them to tourists. That’s why travel agencies are known as image builders of a country.

A prospective travel agency is one that makes arrangements of travel tickets (air, rail, road, and sea) travel documents (passport, visa, and other documents for travel), accommodation, entertainment, and other travel-related services from the principal suppliers. It may also secure travel insurance, foreign currency for the traveling people.

Travel managers should have professional qualifications and experience. In a small agency, training will probably be on-the-job. Large companies may offer a training program.

The main features of travel agency business are:

  1. An important link between the clients and principal suppliers.
  2. Image builder.
  3. Ensures rapid travel service.
  4. Provider of authentic and reliable travel information.
  5. A social and continuous process.
  6. Establishes good relationship with clients and vendors.

First German Travel Agencies

The first German Travel agencies in the line of modern travel agencies were known as Immigration Agencies. These agencies were engaged in booking ship passages and sometimes group journeys from a collection point to the point of embarkation.

The oldest of such agencies was Reiseburo Rominger in Stuttgart in 1842. This agency subsequently extended its activities to the whole range of travel services in Europe. To make traveling simple for the individual, the concept of tickets for means of transport was introduced and issued by these larger agencies in Europe.

First Indian Owned Travel Company

Pallonji Katgara & Jamshedji Dastoor created the Jeena and Company (a shipping and export company) with a seed capital of US$ 75 in 1900. Jeena Tours and Travels was established in 1920 with the privilege of being the first Indian – owned travel company.

In 1961 the Company was merged into Travel Corporation (India) Pvt Ltd to become India’s largest travel company under the leadership of the Katgaras.

Types of Travel Agencies

These are major types of travel agencies:

  1. Retail Travel Agency
  2. Wholesale Travel Agency

Retail Travel Agency

A retail travel agency sells tourist products directly to the public on behalf of the product suppliers and in return gets the commission. Some package tours are sold in two ways i.e. on a commission basis and mark-up price.

When a travel agency sells a tour package at a marked-up price, it means that first, it marks up the cost of a tour and then sells it at a higher rate. The mark-up price is the difference between retail price and wholesale cost.

A retail travel agency is defined as a business that performs the following functions: quote fares and rates, make reservations, arrange travel tickets and accommodation, arrange travel insurance, foreign currency, documents and accept payments.’ The main source of revenue for a retail travel agency is the commission received from the vendors.

However, the rate of commission differs from organization to organization and travel component to travel component. In India, retail travel agencies receive ninety-five percent of their revenue from the commission and the remaining five percent from consultancy services.

Wholesale Travel Agency

These agencies are specialized in organizing package tours, which are marketed to the customers/tourists through the network of a retail travel agency or directly to the prospective clients (if the wholesale travel agency has a retail division).

A wholesale travel agency purchases tourist product components in bulk and designs package tours. Sometimes, a wholesale travel agency buys travel components from a vendor in bulk and resells them to another travel business organization.

Wholesale travel agencies assemble package holidays and sell them to the clients by retail travel agencies. A typical package tour includes air tickets, accommodation, and sometimes other services may also be included in it such as entertainment, sightseeing, and sports activities, etc.

These packages are referred to as ‘package tours’ as most of these tours include the services of escorts but a few are sold to people who wish to travel independently.

How a wholesale travel agency generates profit? Generally, a wholesaler receives volume discounts from principal suppliers because a wholesaler might agree to purchase a large number of seats from a particular airline or reserve a large number of rooms at a particular hotel and resort.

Practically, a wholesaler who sells package tours is called a tour operator. However, technically there is a difference between a wholesaler and a tour operator. A wholesaler who sells tourists’ products individually without assembling them into package tours is called a consolidator.

Mostly, these are specialized in a particular product component, such as air tickets, accommodation, conferences, and conventions, etc.

Tour Operators

An organization, firm, or company which buys individual travel components, separately from their suppliers and combines them into a package tour, which is sold with their own price tag to the public directly or through middlemen is called a tour operator.

More precisely, tour operators are mainly responsible for delivering and performing the services specified in a given package tour. They can provide these services themselves as some have their own cars and coaches, hotels, and other travel-related services or can obtain these from other suppliers.

That is why they are called manufacturers of tourism products. Tour operators are sometimes called wholesalers but this is partially true because a wholesaler buys goods or services in bulk at his own account to prepare a tour package and then retails it through the travel agencies or directly to the clients.

However, a tour operator who has his own one or more tourist product components formulates a new tourist product for example ‘inclusive tours’. Tour Operators generally offer a variety of package tours to cater to the needs of different kinds of travelers.

Types of Tour Operators

Let’s discussed the types of tour operators which are given below:

  1. Inbound Tour Operators
  2. Outbound Tour Operators
  3. Domestic Tour Operators
  4. Destination Management Companies/ Ground Operators

Inbound Tour Operators

These are also known as incoming tour operators. Technically, the operators who receive guests, clients tourists and handle arrangements in the host country are called inbound tour operators.

For example, a group of American tourists coming through TCI to India and the company makes arrangements and handles the group in India, then TCI is called an inbound tour operator. Incidentally, the inbound traffic to the country for the last two decades has been decreasing.

Essentially, tour operators need to adopt innovative marketing strategies and should introduce special interest tours to cater to the special needs of foreign tourists.

Outbound Tour Operators

Tour operators, who promote tours to foreign destinations, maybe business tours or leisure tours are called outbound tour operators.

Indian outbound tourist traffic is growing at a rate of 10 percent annually and this makes India the second-largest country in the world with regard to the traveling population.

However, India’s outbound tourism is not only holiday-oriented but it is business-oriented too. There are many travel companies that offer outbound packages such as SITA, TCI, Thomas Cook, etc.

Domestic Tour Operators

Domestic tour operators are those who assemble and combine tourist components into inclusive tours and sell them to domestic travelers.

In general, these tour operators provide travel services within the boundary of the home country and offer package tours to the travelers viz. domestic inclusive tours or independent tours.

Destination Management Companies/ Ground Operators

These are commonly known as handling agencies and their main function is to organize tour arrangements for incoming tourists on behalf of overseas operators. When a tour operator himself promotes beach holidays, wildlife holidays, wildlife tours, heritage tours, cultural tours at different places, the difficulty arises.

It is the ground operator then who handles the incoming travelers in the same season but at different places ensures that the entire operation is according to the package tours or agreements.

Sometimes when a handling agency is at a prominent tourist place, for example, Delhi, and it has to make arrangements to Goa, then it contracts (if it has no office of its own) with a local operator (known as an excursion agent) to handle the arrangements on his behalf.

Difference between Travel Agencies and Tour Operators

  1. The major difference between tour operator s and travel agencies is in the system of providing service to customers.

    A tour operator is a company that buys certain services from different companies (like hotels, restaurants, cafes, beauty salons) and forms a single tourist product out of them using its own pricing system.

    A travel agency acts like an independent reseller. Its profit is the commission for the sale of the operator’s tours to customers. That’s why the agent’s price is usually higher, although there are moments when agents deliberately understate their prices.

  2. Usually a tour operator is a comparatively large company in comparison with a travel agency. It has its main office and several subsidiaries in order to offer their services to more potential customers. Many big tour operators have subsidiaries in different countries.

    Irrespective of the number of subsidiaries a tour operator usually concludes agent agreements with independent travel agencies that then sell the operator’s tours to their customers. The more partners a tour operator has in as many countries and regions as possible, the more the sales volume is and, correspondingly, the more tourists will buy its tours and the more profit it will gain.

  3. A tour operator may be a supplier (meaning they might own hotels or car rentals or Both) and allow to use their own inventory or their supplying partner inventories for a fee. A travel agent is only a distributor, and typically travel agents rarely own any travel assets (such as car rentals or hotels) of their own.

  4. Travel agencies are less inclined than tour operators to perform ground services i.e. to act like a handling agency or ground operator.

  5. A travel agency may deal with one component of travel product while a tour operator offers a variety of tour programmes.

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