What Is a Tour Operator?

When starting a travel agency, there is much to learn such as industry-specific terminology and best practices. One important nuance to understand is that tour operators can assist travel agents in creating great itineraries for clients. 

When you start looking at options, it is important to know that tour operators are often classified in different ways such as mainstream, boutique, or luxury; or by niche or activity, such as bike, rafting, cruise, or even bus. The specialties are mainly driven by the types of tours created for the client.

Tour operators know destinations intimately and take care of the logistics and details. Among the travel advisors interviewed for this article, they all agree that tour operators they have trusted relationships with are key to their successful businesses. 

Let’s start at the beginning and answer some common questions about what tour operators are and how they work with travel agents.

What Is a Tour Operator? 

At its most basic, a tour operator is a type of travel supplier that creates and sells tour packages. These packages typically bundle accommodation, transportation, activities, guides, and sometimes meals into one price. Flights are occasionally included as well. Tour operators often specialize in certain destinations or travel niches.

Several different terms are used for tour operators— inbounds, outbounds, DMC (destination management company), and suppliers. Here’s a closer look at these terms.

Inbound tour operator

An inbound tour operator is an operator who specializes in or is located in the country, region, or place where advisors are designing a client’s itinerary. Inbound tour operators receive clients into their country or region (though they may serve domestic travelers as well). 

Some inbound, or local, operators purely run day tours, while others also run multi-day itineraries. Some inbound tour operators may also be called DMCs. (See more below on DMCs.)

Outbound tour operator

An outbound tour operator generally works with DMCs to design and package itineraries that they sell directly to consumers. These may be group departures, custom, private, or self-guided. They may use a DMC for part of an itinerary or different DMCs for different segments of a trip, for example, if different countries are involved. 

Destination management company (DMC)

A DMC (also called on-site) is a local company with deep knowledge and resources that puts together tours by working with local and inbound tour operators, guides, accommodation providers, transportation providers, and others. 

What’s the difference between a tour operator and a DMC? A DMC is a type of destination/regionally specialized tour operator with boots on the ground whereas a tour operator may subcontract some or all of their tours.

Some DMCs only work B2B (business to business -- for example, booking a trip for an outbound tour operator or travel agent) while others may also work B2C (business to consumer, or direct to consumer). The DMC tour can be white-labeled for the outbound operator.

Supplier

To further confuse matters, all these tour operators are also referred to as Suppliers. “Suppliers” is the umbrella term for all different kinds of tour operators (in addition to other travel providers). Every travel consortium will have a list of what’s called preferred suppliers, which are approved and vetted suppliers that include tour operators and DMCs. 

What Type of Trips do Tour Operators Provide? 

Just as there are many different types of tour operators, there are a variety of trips they may provide. Here are a few examples of the different kinds of trips a tour operator might offer a traveler or travel advisor.

1. Group Tour

A guided trip package for travelers that has a common itinerary, travel date, and transportation. Group tours are usually prearranged and prepaid and include transportation, lodging, dining, activities, arranged experiences, and admissions to attractions.

2. Guaranteed Departure

A group tour that will depart no matter what (great for travelers with no flexibility or limited time off).

3. Private Tour

A guided tour for a pre-established group (or small group) of travelers that is catered to their specific schedule preferences.

4. Custom/FIT Tour

Tailoring each component of an itinerary (car, air, hotel, entertainment, day tours, etc.) to the client’s exact specifications.

5. Self-Guided Tour

A tour with no private guide, where travelers go at their own pace on a pre-arranged itinerary.

6. Charter Packages

An unguided packaged tour (common among sun-and-fun destinations with all-inclusives and include chartered air)

How do Tour Operators Work with Travel Advisors? 

Tour operators have itineraries for sale or options for the travel advisor to choose from to curate their client’s itinerary. There might be a booking area just for travel advisors and B2B partners on their websites. 

Advisors might work with tour operators to book into a set group departure date or to work with a custom/FIT consultant on their team who can craft a custom or private tour for their clients. 

PAYMENT STRUCTURES

For travel advisors, one of the biggest differences between tour operators is whether the tour operator works from net rates or commissions. 

Net Rate - Some DMCs and tour operators offer net rates, which allow advisors to determine the appropriate profit margin when setting the price for the client. In this case the advisor collects payment from the traveler and the travel advisor pays the DMC the net rate.

Commission - There is another option and that is a DMC giving a retail price for their tour to the travel agent and then collecting payment from the traveler. The travel advisor then earns a commission from the DMC.

Outbound tour operators usually follow a commission-based model. Some companies will create tiered commission structures that allow advisors to earn more commission based on sales volume for the year. (Note, this can be an advantage to working with a host agency as they can help advisors reach higher tiers with tour operators.) 

CLIENT COMMUNICATION

Most of the time, tour operators expect travel agents to be the touch point with the client. They direct communications to the advisor, who then shares the details with their client. Outbound tour operators maintain communication with the travel advisor from pre-travel all the way through post travel.

However, for inbound tour operators and DMCs, a travel advisor books the trip for the client and maintains communication up until departure. Once the client departs, the inbound or DMC communicates directly with the client during travel to ensure solid communication. However, it is important that there is trust and an agreement that the inbound or DMC doesn’t solicit clients for future business.

Where Do Travel Advisors Find Good Tour Operators to Work With?

Many consortia and host agencies will do the heavy lifting and find great operators for advisors to work with, however travel advisors may need to go outside preferred suppliers.

So where do advisors find that boutique DMC in Slovenia, Panama, or Japan or that outbound tour operator that offers everything the client has requested?

1. Events - Attend trade events and meet with operators in new destinations. At those events, meet other advisors and learn what operators they like to work with. (Check out HAR’s article on how to make the most of a travel conference.)
2. Host Agency - Utilize the great partnerships host agencies set up and also let them know when there’s a significant demand for new experiences. Some host agencies may have preferred DMCs advisors can utilize.
3. Consortia - Virtuoso, Signature, and Travel Leaders among others vet operators, removing some of the barriers for advisors to build relationships with suppliers.
4. Facebook groups (for example, Travel Advisors Selling Europe) - virtual groups and communities centered around a travel niche can be a great place to ask questions or just listen for new operators. (Read Nikki Miller’s post on asking qualified questions to travel advisor Facebook groups.)
5. Travel Trade Communities - Utilize and become active in travel trade communities such as group chats and webinars in order to connect and get to know your community members. Share your needs publicly and see what comes back!
6. Referrals - Word of mouth referrals from fellow advisors can be a fast track to reliable operators.
7. FAM Trips - Going on a trip with a potential tour operator can definitely create a pathway to partnership as the advisor can experience the tour operator’s service offering.
8. Representation companies - If you know people at sales representation companies and they have similar values to you, this can be another way to vet out potential new partners. These companies are essentially the sales and marketing “arm” for boutique lodges, specialty operators, and DMCs. (e.g. Emerging Destinations and Kusini Collection)
9. Tourism Boards / Destination Management Organizations (DMO)/ CVB (Convention & visitor Bureaus) - Often the official tourism board, CVB, or DMO for a region or place will have a marketing and/or management organization that is responsible for driving visitation, creating visibility, and developing healthy thriving local communities. These offices often have amazing relationships with local businesses and can be great options for discovering interesting travel opportunities for clients.

Once advisors find contacts, the most important thing is to start building relationships and trust. Doing research to understand the best questions to ask will help.

Vetting a Tour Operator? Here's what to Look for!

There are some simple ways to check to see if a tour operator is going to be a fit for you and a trustworthy business. Larger companies will have some of this dialed in more than some smaller businesses. Don’t count them out, just know you may need to ask more questions. Smaller boutique DMCs and operators can offer some amazing experiences for clients.

If you’re a travel agent, connecting with a tour operator that’s a good fit for your agency will help you provide stand-out service to your clients. 

“No matter who I called, someone always picked up. They were easy to talk to. It felt like a team.” - Judi Lombardi

Here's a checklist to use when vetting a tour operator:

1. Consortium’s preferred supplier 
2. Host agency’s preferred supplier - (Go to HAR’s host agency profiles. When you click into a profile, their preferred partners will be listed at the bottom!)
3. Association Membership (examples USTOA, ASTA, IATA, ATTA) or connection to Destination Management Organizations (DMO) or Chambers of Commerce
4. Awards from recognized industry leaders from media companies to associations
5. Sustainability certifications, environmental projects or local community partnerships
6. Positive reviews from clients or travel advisors
7. Dedicated travel advisor portal - like this one from G Adventures
8. Travel advisor dedicated number and staff 
9. Travel advisor branding possible on materials to clients
10. Visible Seller of Travel # 
11. Insurance coverage, $1-2M in liability insurance is best practice. 
12. Number of years in business
13. Secure digital payment methods are available
14. Sample trips, experiences, dates visible on their website
15. Payment structure (net rate or commission)
16. Business structure - B2B, B2C, or both? Do they currently work with advisors?

Closing

Tour operators are an important part of the travel ecosystem for the traveler and travel advisor alike. The variety of tour operators available offers advisors an opportunity to build partnerships to plan and book the perfect itinerary for their clients. 

If you’re a travel agent, connecting with a tour operator that’s a good fit for your agency will help you provide stand-out service to your clients. 

Did we miss anything about working with tour operators that gives your business an added edge? Weigh in below in the comments with your experiences and tips! 

Casey Hanisko, executive coach, business consultant, and travel industry expert and Mary Stein from Host Agency Reviews collaborated on this post. Travel advisors, Erin Green, Pique Travel; Judi Lombardi, Memories on the Move Travel; and Laura Mandelkorn, Go Custom Travel graciously shared some of their business practices and tips to inform this article.