Travel Agency Startup Costs and Earnings: What to Expect
This article is the 3rd of 4 in the 2018 Travel Agent Income series. You can read the rest here:
- "Travel Agent Income Report, 2018 [Free Infographic+ More]
- "Which Travel Agent Specialties Generate the Most Income? (2018)"
- "Who is the Hosted Agent in 2018?"
We have loooads of articles about starting a home based travel agency. One might say we have written on the matter exhaustively. As it turns out, there's an area we haven't touched on ... and that is What sort of travel agency startup costs (and earnings) can you expect?
After our illuminating 2018 travel agent income survey, we wanted to offer agents a sneak peek into the crystal ball when it comes to travel agency startup costs and earnings, exploring questions such as:
- How much does it cost to start a travel agency?
- How much do travel agents earn when they're getting started?
- What are common challenges and rewards for new travel agency owners?
- How does income potential grow with experience and training?
While we don't have a crystal ball, we do have a lot of data from our 2018 income survey. With this data, we'll give agents an idea of what to expect when starting a home based travel agency in terms of time and travel agency startup costs, as well as earning potential.
Please let me put the cart before the horse—our beauteous infographic, worthy of scrolled parchment, unfurled to reveal (some of) the data this article will address:
Pretty, eh? Well this infographic has a few siblings. Don't forget to check out our previous two articles in Travel Agent Income Survey 2018 series:
- Travel Agent Income Survey Report, 2018
- Who is the Hosted Travel Agent in 2018?
- Which Travel Agent Specialties Generate the Most Income?
Okay, now here's the horse. Giddy-up!
Travel Agency Startup Costs
It's true that one can hypothetically open a travel agency for almost zero dollars. But not only is it difficult to open a home based agency for nothing, it'd be nearly impossible to open a successful home based agency for nothing.
When thinking about the travel agency startup costs you might encounter, one can expect to drop some coin, budgeting for expenses including (but certainly not limited to):
- Host agency, franchise, or consortia startup and/or monthly fees
- Education and training
- Building a website
- Registering business
With research and resourcefulness, all these items can be achieved affordably. But what does it all add up to? That's what we wanted to find out. So we asked YOU—travel agents who started their agencies from 2016 to present day—"Approximately how much did you invest in your travel agency to get started?"
The range of initial investment for agents with <2 year experience was vast: $0-$30,000. Perhaps you are doing a double take (especially at the 30K number), but it's important to realize that this number includes all travel agent startup, regardless of whether it's a host agency, consortia or franchise. Going with a travel agency franchise generally entails a substantially higher investment than going with a host agency or consortia, hence sweeping range of the startup costs. (Wonder why a travel franchise costs more? Read our article on travel agency franchises.)
Needless to say, that range doesn't give a great idea how much you can expect to spend. So here's some helpful data: The average amount travel agents invested in starting their travel agency was $3,170.1 Perhaps even more telling is the mode response (the most popular answer) which was $500.
The $3,170 average travel agent startup costs for a travel agency included all home based travel agents, regardless of whether or not they purchased a franchise, were part of a travel consortium, had their own agency accreditation number, or were hosted by a host agency (Not sure what a host agency is? Read this). So we decided to get a nit picky and break it down further to compare the average hosted travel agent startup cost and the average travel agency franchise startup cost:
1. Non-Franchise Travel Agency Startup Costs:
For travel agents who are hosted, have their own accreditation or were aligned with a consortium, the average startup cost was $1,563. The range of travel agency start ups costs for agents with a host agency was $0-$15,000. Only 15.3% of this segment reported investing more than $2,000 toward their initial start up.
2. Travel Agency Franchise Startup Costs:
Franchises traditionally cost more than starting with your own accreditation, joining a consortia or being hosted. But as with choosing a host agency/consortia, there is a broad range of travel agency startup costs when it comes to franchises. The range of startup costs for a travel agency franchise was $3,900-$24,000. The average startup cost of a travel franchise was $13,488.
Earnings for New Travel Agents
In our big picture 2018 income survey article, we didn't include income data from agents with fewer than 3 years of experience. It's not because we're trying to be snobs to the new kids on the block, it's because we understand that it takes time for travel agents to increase their earnings.
It takes time to complete the education you want to complete (if any), and to begin to attract clients, to get websites up and to organize your marketing strategy. It makes sense that new travel agents would spend more time building their agency's foundations and less time booking travel.
Another thing that is often overlooked and shouldn't be: travel agents usually don't get paid commissions until after the client's travel is completed!
That means if you are a new agent and book a client in September for their spring break trip the next calendar year, you'll have to sit through fall and winter before you see that springtime commission! For this reason, if an agent started in 2018, we didn't ask for income data because few agents will have already sold travel AND received commission. The industry can be frustrating for those who are looking for instant gratification.
All this considered, the average earnings for new travel pros might seem meager. In 2018, the average reported earnings for new agents was $8,973 for full time agents and $3,744 for part time agents. Below, we broke it down to compare averages of agents in their first year of selling travel versus their second year:
The trend above was nearly identical for agents who reported selling travel was their primary income versus a secondary source: Agents for whom selling travel is their primary revenue stream reported significantly higher income on average.
Before you throw your computer into a pond and run screaming, I want to report some very good news: earnings do go waaaaay up after your first year in travel! There was 441.8% increase in agent earnings between Year 1 and Year 2. (No, there is no typo with the decimal point . . it is seriously four hundred forty one point eight percent!!!) With one exception, the trend keeps going in that direction as agents gain more experience:
Travel agent earnings continued to rise with experience, except agents who reported 12-14 years of experience.
That's right. Travel agent income prospects continue to improve with experience. Deep breath. You can take the paper bag away from your mouth now.
Common Challenges/Rewards for New Agents
Now, how do you mentally prepare for all the ups and downs that come with a travel agency startup? Well we happen to have a few ideas about that based on insights from our 2018 Travel Agency Income Survey:
It's probably no surprise that the most common challenge reported for new agents was "finding clients" with a 47.8% response rate. This was the leader by a huge margin, followed by "competing with OTAs" (14.1% response) and "running my own company" (12.9%).
However, the primary concerns shifted as agents gained more experience. Agents with 3+ years of experience reported that "competing with OTAs" was the biggest challenge at a 22% response rate. It essentially tied with "finding clients," which had 21.7% of the vote. Regardless, a 26.1% drop in response rate indicates that the challenge of finding clients eases over time.
On a happier note, the greatest reward among new and seasoned travel agents reported was, "I love everything about my job!"
Still bummed about the challenges? It just so happens that we have a resources to help you with some of these barriers!
- Want to understand how travel agents can "compete" with OTAs? Read up on 3 ways travel agents can save clients money over Expedia, and about how travelers can save TONS of time and money when they book with a travel agent.
- If it's more clients you're looking, check out some of our strategies to find your clients on social media, our $100 Marketing Video, or three easy steps to get more clients.
With some networking and marketing elbow grease (hopefully using those resources above *hint, hint*), clients will find their way to your door! Our survey indicated that travel agents attract more clients every year for the first three years:
Well done, travel agents!
Can Certification, Training, or Memberships Improve Earnings?
People often write in looking for different travel agent training, education, and/or professional development opportunities. As with most things related to the travel industry, there is no singular training program that is ideal for every travel agent.
We've talked at length about travel agent certifications here, and have a resource on travel agent training and education here. But our survey shows where the rubber meets the road in terms of efficacy of training and certifications.
Experienced agents with a certification from the Travel Institute (TI) reported an average income that was 20.8%* higher than the overall average income reported in our 2018 Travel Agent Income Survey—$48,764 with TI certification versus $40,377 without.
This trend continued for experienced travel agents who are members of ASTA. While ASTA (American Society of Travel Agents) is a travel agent association (not a training program or certification), it's worth noting that ASTA members reported a significantly higher income among experienced agents, $52,565—a 30.2%* above the overall average.
New agents were not too far behind experienced agents in terms of taking advantage of TI certification and ASTA membership. 20.2% of new agents (0-2 years of experience) reported they were members of ASTA compared to 26% for experienced agents. When it came to travel agent education, 12.7% of new agents reported receiving a certification through TI—including CTA, CTE and/or the TAP test—compared to 15.3% among experienced agents.
The Future Looks Good
Prospects look good for travel agents!
Travel agency startup costs are affordable, and our 2018 survey confirmed what we've suspected—that it takes a few years for an agency to get off the ground and earn a sustainable income. But earnings continue to trend upward with experience, and certification and membership to some associations may also support higher earnings.
We'd love to hear from you—new and experienced agents alike! How long did it take for your agency to become sustainable? Did you find your travel agency startup costs were similar to those in the article? For agents with a few years under your belts, what do you wish you did differently? For new agents, where are you feeling the need for additional support?
Let us know in the comment section below! * This calculation was corrected July 27th 2018. The original post incorrectly stated the Travel Institute increase was 17.2%, and the ASTA increase was 23.2%.
- number includes only respondents who recorded an answer to "approximately how much did you invest in your travel agency to get started?" ↩