Requirements to Start a Travel Agency
Are you the kind of person who always finds themselves booking flights and hotels for friends and family? There’s a true art in scoring a great travel deal and planning a killer vacation, and if you’ve got the chops, you might want to consider opening your own travel agency. This exciting career has a low bar of entry because it requires no formal education, it’s pretty cheap to get off the ground and there aren’t a lot of requirements.
Unfortunately, travel agencies are falling out of popularity. According to the Bureau of Labor Statistics, the industry is expected to shrink by 6% between 2018 and 2028. Travel agents still make a median wage of $38,700, which can be adjusted as either a full-time or part-time income. All in all, launching your own agency is pretty low risk as long as you don’t go all-in off the bat. Consider these travel agency requirements before you get started.
Before your business can make money, you need to set up the financial structure that helps you pay taxes to the IRS and lets you obtain a business license from local and federal authorities. Most start-up travel agencies choose between two options:
- A Limited Liability Company (LLC): This allows you to hire employees or enter a partnership with another travel agent. This is a great option for one or more people launching an agency together.
- A Sole Proprietorship: It’s free to register with your company name, but you’ll still need to grab an EIN (or employee identification number) from the IRS so you don’t have to use your Social Security number on tax forms.
You can even start your business as a sole proprietorship and then expand to an LLC, but you may wish to get that out of the way before your launch.
After you decide on your structure, you’ll need to purchase a minimum amount of insurance before you can get a business license from your local municipality. This includes general liability insurance or workman’s compensation if you plan on having employees, but there’s also specific insurance for travel agencies and tour operators. Talk with an insurance agent about your options, but expect to spend around $2,500 per year for a plan.
In the world of travel agencies, there’s something known as the Big Five SOT States. These states have Seller of Travel Laws, which means you’ll need a license to operate in those areas and to sell to residents in those areas. This includes Hawaii, Washington, Iowa, California and Florida.
Thankfully, travel agency licenses are all just red tape. There isn’t a travel agent test or any sort of education required. It’s really just a matter of filling out forms and paying a fee, which ranges from $15 to a couple of hundred dollars. Get this from your local municipality along with your business license.
Since every state varies and the regulations change frequently, it’s important to do some research. For example, Delaware isn’t part of the Big Five SOT states, but it does require a license if your business address is within the state. Nevada got rid of their SOT laws in 2015, and you never know which state is next.
Yes, travel is very easy to book in the world of online flight and hotel search engines, but an actual travel agency must be accredited by either ARC (the Airlines Reporting Corporation) or IATAN (International Airlines Travel Agent Network). The latter has been a standard in the travel and tourism industry for more than 25 years but charges a yearly membership fee of about $195.
Accreditation isn’t necessarily legally required if you’re an independent agent operating your own agency by yourself (i.e. you’re a sole proprietor), but not having it can hurt you. Once you’re working with the ARC or IATAN, suppliers will start paying you commission for booking their services and products. Unfortunately, you need to achieve a certain number of sales before you can become accredited.
For this reason, many travel agents get their start with a host agency before branching out on their own. These agencies are already accredited, have relationships with suppliers (meaning you’ll get a higher commission) and offer training and marketing support. In exchange, you’ll typically have to pay an annual fee ranging from around $200 to $500, but once you get enough regular clients, you can launch your own agency and seek accreditation independently.
Once you’ve set up your agency, you need to find clients. You can do this by advertising in local papers or on travel websites. You should register your business with Yelp, TripAdvisor and Google and encourage customers to leave reviews. You might also want to consider a targeted social media marketing campaign.
Many travel companies work with influencers, who charge a fee per post. These influencers can blast out drool-worthy photos of fun excursions or gorgeous hotel rooms that you helped them book. Influencer marketing is generally a more successful approach than banner ads on smaller travel blogs or websites.