Travel Agencies – 2017 Industry Update

Travel Agencies – What’s new in 2017?

2017 is set to be an exciting year for travel agencies.  Each day we receive more requests from individuals looking to start an agency and obtain the required surety bonds.  These requests range from do you need a license, how much it costs to get it, and how long the licensing process takes.  While the type of questions aren’t an important indicator of the industry, the number of questions are important.  In general, the more requests for information we receive; the higher the perceived interest in the travel agent industry.  A higher level of interest often leads to a higher number of new agencies opening their doors.

Online or Brick and Mortar?

Overall, we’re seeing less brick and mortar agencies compared to online storefronts.  New agencies are forgoing the brick and mortar locations to keep costs down in the first year of operations.  This allows a new travel agency to avoid pricey multiyear lease commitments for a physical store location.  These savings are often used for website development and online advertising such as Google Adwords.  Once established, these online businesses often lease a small office to accommodate new agents or support staff.  However, almost all of the new applicants we see are operating out of their home initially until they become profitable.

We’re seeing a decline in the large brick and mortar locations which once dominated the industry.  The cost of these locations, usually in high visibility areas, are outweighing their effectiveness.  Online sales continue to put pressure on margins which are quickly failing to justify the building’s cost.  Many of these agencies are moving their employees to less visible and less expensive office locations.  They’re primarily meant to house support staff and agents for large travel agencies.

Foreign Travel Agencies

We continue to see an uptick in the number of non-US based travel agencies register for seller of travel licenses.  In most cases, these foreign agencies are well established in their home country and looking to expand into the US.  However, as they expand, most of them are utilizing specialty lawyers to help with licensing.

Travel Agent Regulation

The regulatory environment for travel agencies remains stable.  While most states don’t have a licensing requirement in place, some like Florida and California require all sellers of travel to register.  In many cases, these states also require travel agency bonds.  These surety bonds are meant to protect clients of the agency from financial harm.  For example: A bond could reimburse a client if the travel agency takes his or her money and does not provide the travel package.  While not all states require registration, it’s important to contact your state to ensure you’re not breaking the law.  In some cases, simply offering travel related services without a license to people living in a state can trigger fines.

What can you expect going forward?

You should expect to see continued competition in the travel industry.  Low barriers to entry and ease of opening a new travel agency will continue to foster new business creation in the space.  Additionally, the lack of state regulation makes it easier than ever to open an agency within a few weeks.