An increasing number of Australians are travelling, driving industry demand for tour arrangement services and tourism companies. In 2015, $6.6 billion was generated in revenue from over 4000 businesses. For the overseas traveller, the strength of the Australian dollar will see more Australians continue to travel overseas. Over the next five years, a rise in travel demand will result in more tour arrangement and tourism companies appear, particularly in the online space. Moreover, this growth will continue to rise as a result of increasing discretionary income and availability of information and reviews online. This article will explore the steps involved in setting up a travel agency or tour arrangement company.
1. Choose the Types of Travel Services Offered
The tour arrangement and travel agency industry offer a plethora of services, ranging from booking tours and arranging trips for leisure, to acquiring tickets for business conferences. One of the first steps you should do in setting up your tour agency is choosing what services you will offer.
At a retail level, most travel agency services target travellers going for leisure. Often they act as an intermediary between transport providers, accommodation operators, and the public. As a business owner, you can also choose to accept bookings online. Currently in Australia, 71% of the industry involves leisure travel services.
Other types of travel services include business travel, tour wholesaling and inbound tours. Business travel services involve cater for corporate clients, often with larger and longer-term contracts. These services arrange not only accommodation and transport but also conference planning and leisure services for corporate clients. Tour wholesalers target onselling travel packages to agencies, which deal directly with customers. Meanwhile, inbound tour operators cater for international clients by making bookings and developing itineraries.
2. Choosing Your Business Structure
Over the past five years, the concentration of the tour arrangement and travel agency industry has increased substantially. This increase has been a result of the growth of franchise chains and mergers and acquisitions among the major operators. Small businesses and sole traders often join franchise networks, such as HelloWorld, to gain access to product and booking systems. Many small businesses are sole traders, often franchisees, which take advantage of the low barriers to enter the industry.
If you choose to join a franchise network, it is estimated that franchise fees and licences account for 8.1% of industry revenue in 2015 – 2016. Helloworld and Flight Centre operate large-scale franchise networks, and it is expected their growth will continue. If you are becoming a franchisee, ensure your franchise agreement and disclosure document is reviewed before you sign the dotted line.
3. Drafting Employment Contracts
The travel industry is dominated by small businesses, with more than 90% employing fewer than 20 people. Employment in the travel industry is expected to grow over the next five years as a result of an increasing number of franchise networks and the low barriers to entry into the industry. This growth will take place both online and offline (customer-facing staff). Moreover, as the industry relies on experienced staff to provide services, wage costs are the largest expense.
Employment contracts in this industry commonly have the restraint of trade clauses, as experienced employees often have good knowledge of the industry’s products. Intellectual property created by industry operators are also often protected in employment agreements to ensure employees leaving a company do not take IP assets away (booking processes, copyrighted material, etc.). An employment lawyer will be able to draft an employment contract suitable for your travel agency business.
If you are looking to establish a travel agency (online, with a shopfront, or operating as a franchise), it is essential that you decide what services you will offer and the structure in which the business will operate. Employment contracts should be drafted with an employment lawyer familiar with the tour or travel industry. Our team of business lawyers can assist you setting up your travel business and ensure it takes off!
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