Introduction
Several changes have emerged due to certain improvements in society throughout time. One of these changes is the increase in purchasing power of modern citizens, which has enabled them to access numerous services and products, especially tourism, quickly. Nothing makes a tourist happier than briefly enjoying festive, playful, and recreational moments. That is why the startup travel agency aims to launch itself as a fruitful venture in the travel industry.
The trends towards travel and tourism offer exciting opportunities for business ventures like this due to the stimulating growth in the tourism and travel industry. To foster understanding between technology and travel, the travelling cycle has incorporated sharing stages, experience, booking, motivation, and research. This travel agency plans to become a competitive tour operator and online travel agent able to provide an inclusive offline and online experience.
Overview of the Business Environment
International tourism and international arrival receipts are used as indicators by the United Nations agency, the World Tourism Organization (UNWTO), for gathering statistical data. The agency affirms that since its publication in 1990, countries visited by outside travellers (international tourism arrivals) has steadily risen except for the COVID-19 pandemic and the 2008 global economic recession (Handayani et al., 2022).
The organization has also estimated that about 1 billion people travel internationally annually, producing about $1 trillion in international tourism receipts (Handayani et al., 2022). The latest 2022 figures from the UNWTO show that developed countries in Europe, Asia, and America constitute the main international tourist arrivals (Pradini et al., 2022). The agency has predicted that with the end of the COVID-19 lockdown in various countries, international arrivals are expected to hit over two billion this year.
The Mission, Objective, and Vision of the Travel Agency
The mission is to enable and promote sustainable growth through provision of multi-theme activities, competency-based voyages, and economic tourism projects. In addition, the travel agency aims to expand the performance of its programs by sharing knowledge, information, and resources through reporting and structural provisions (Chang et al., 2019).
The vision of this business venture is to be devoted to providing adequate services that will be recognized by travellers and organizations alike as one of the best agencies for tourism tours and planning. Finally, the objective of the travel agency is to promote trips and memories that will satisfy all its clientele by measuring the social, economic, and cultural issues influencing the tourism industry.
Top Travel Destinations
Regarding on-trend travel destinations, places like London, Costa Rica, Lisbon, and New York are hard to miss. Google recently unveiled the top trending destinations for the year ended 2022 based on flight searches in the search engine (Handayani et al., 2022). The United Kingdom (UK) capital, London, is at the top of the list due to the famous stuff and treasure trove travellers can do and see. Paris and Ho Chi Minh City in Vietnam also made it on the list of well-preferred travel hotspots. Other popular travel destinations include New York, Lisbon in Portugal, Vancouver, India, Rome, and Toronto in Canada.
The tourism and travel industry is currently working in an environment experiencing steady transformations in travel demand due to solid globalization brought about by the growing middle class. These consumers search for authenticity and unique experience, producing a niche market of frill and memorable travel (Naidoo, 2019). Customers are more willing to experiment with new adventures, attractions, products, and greater involvement. Developed markets like the UK, Japan, and the United States stress value and experiences and focus less on eye-catching costs (Naidoo, 2019). Emerging markets like third-world countries focus more on flashy consumption related to class.
Market Size
The size of the travel market is growing because of a relatively healthy global economy, and currency devaluation in less developed countries has made travelling cheaper. With an estimated 5% annual growth, leisure travel is one of the sectors of the industry with the most rapid expansion (Noor et al., 2020). In the United States alone, the size of travel agencies has grown by 6.9% in 2023 (Capriello & Riboldazzi, 2020). In addition, the number of high-net-worth individuals has drastically increased worldwide over the years. Consequently, it has increased luxury travel, primarily through retreats and incentives.
Market Segmentation
The travel market is segmented via five main principles: demographic, geographic, behavioural, psychographic, and internet connection. Travelers are divided according to their socioeconomic status, ethnicity, age, family structure, life cycle, and gender through demographic segmentation. Younger travelers, between the ages of 18 and 40, favor exciting, affordable vacations that include a variety of entertainment and social activities in addition to sightseeing (Capriello & Riboldazzi, 2020). Elderly travelers like pre-arranged, well-structured trip packages with all the conveniences and comforts they anticipate.
Political boundaries, geography, regions, nations, states, and cities are used to segment the market geographically. The premise behind geographic segmentation is that people from comparable areas will share traits like spending patterns and lifestyle traits (Naidoo, 2019).
For instance, India’s tourism department has distributed the foreign markets into ‘similar’ areas, which include Australasia, the Far East, the Middle East, Europe, and the Americas. In addition, the market is segmented based on the products offered. For example, mountain resorts in India are not promoted in Andorra or Switzerland but in areas without mountains, such as the Netherlands. For similar reasons, desert safaris in West Africa are promoted in countries like Germany or the UK.
Psychographic segmentation considers the traveller’s psychological composition. Information regarding the tourist’s interests, values, personalities, and lifestyles is collected, considering that travellers in similar demographics might have varying psychological profiles (Edwards, 2021). For example, Sky diving is an adventure product targeted to adventure seekers, while an all-inclusive resort with quieter activities will target less adventurous individuals.
On the other hand, behavioural segmentation differentiates clients based on their consumption habits, like brand loyalty or frequency (Edwards, 2021). For example, clients with high brand loyalty will prefer to only stay in Four Seasons Resorts and Hotel, irrespective of the destination. They are less likely to consider alternative accommodations. A particular group might also consider seasonality as their travel habit. For example, European travellers prefer summer trips because the vacation period is extended.
Currently, there are over 5 billion internet users in the world. Internet users are most prevalent in Asia, then Europe, Latin America, North America, and Africa (Weigert, 2019). Africa has experienced immense growth in internet users, with over 43% of Africans now using the internet (Weigert, 2019).
The travel agency will focus on the internet’s penetration level to determine the demographic of the travel market. The estimated size of the fixed internet travel market for young demographics travelling around the world has almost doubled since the COVID-19 lockdown ended.
Entrepreneurial Skills Needed to Run the Travel Agency
Leaders should utilize Robert Katz’s skills to help them in enhancing management performance. They include conceptual, human (interpersonal), and technical skills (Kimeto, 2021). The three categories of skills surround a massive range of capabilities, but each selection defines how the skills interrelate with management at several levels (TravelPerk, 2021). The skills needed to run the travel agency include customer service, scheduling, good communication, sales, time management, and information technology skills.
Interpersonal Skills
Good communication and customer service are the human skills needed to influence consumers to acquire the best travel deals. In addition, good communication will ensure that clients are assisted in handling challenges, such as flight delays, in obtaining their travel goals (Kimeto, 2021). Leaders who are loyally followed and admired are concerned about their team members as people with actual needs and put their team ahead of personal goals.
Technical Skills
Information technology, sales, and scheduling skills are the technical skills needed for operational activities. These technical skills will be used to collect critical data and information for strategic planning (Technofunc, 2021). Sales skills will be essential when promoting premium packages, and scheduling skills will ensure clients get their flights and accommodation on time. In contrast, IT skills will be essential in managing and tracking client bookings (Technofunc, 2021). In addition, they will assist in realizing the economic, technological, social, demographic, and legal considerations of entering the market.
Conceptual Skills
Conceptual abilities focus on fusing imaginative intuitions with an understanding of the situation to produce ideas. Thus, wide strategic scenarios and higher-level thinking benefit more from conceptual skills (Kim et al., 2020). Time management is an example of a conceptual skill needed to meet the need of the consumers and balance priorities without rearranging schedules. Conceptual skills are also essential in strategic planning that involves generating business policies, values, ethics, objectives, procedures, and mission statements.
Industry Analysis
The travel industry comprises two categories, which are leisure and business. This segment provides an assessment of both categories combined. Companies in this section offer travel booking to memorable destinations via organization offices and websites (Fang et al., 2021). Porter’s three competition sources, which include the threat of substitutes, industry rivalry, and the threat of entry, will be used to determine the risks and attractiveness of the industry.
Industry Rivalry
The two sorts of businesses that make up this group are internet destination providers and conventional travel vendors. Traditional travel suppliers constitute knowledgeable advisors managing a network of innovative travel agencies aimed at offering unique travel packages (Fang et al., 2021). Also, the category includes travel merchants operating on a global scale who have switched from conventional to online sales. Some of the largest travel retailers include Booking.com, Lotte Duty-Free, and Fox World Travel (Tighe, 2022). These companies not only have numerous agencies and offices around the world but also use their websites to provide travel packages.
Online destination providers do not need a group-buying model to offer discounted prices to various destinations. Voyage Prive, SniqueAway, and Jetsetter are some companies that offer free membership to access their offers, while others, like Kiwi Collection, provide deals to all travellers (Capriello & Riboldazzi, 2021). These companies offer high-standard products by assessing destinations before providing them to customers. There is less competition being felt from organizations established in this industry. Their offers are more directed towards travel experiences than price because of the requisites of travel consumption (Abrate et al., 2020). It allows this travel agency to grow its profit margin if it can provide attractive travel packages when it joins the market.
Threat of Entry
Many competitors can join the travel industry because the entry barriers are low. Entrants will be separated into generic online retailers and new entrants (Singh & Ranjan, 2019). The new companies, including start-ups, lack significant experience selling travel-related items online. They perform poorly in online sales and marketing as they lack the experience to offer eye-catching travel packages.
On the other hand, generic online retailers worldwide provide numerous travel-related services due to their large consumer base (Sharma et al., 2020). They do not concentrate on a specific kind of business when utilizing group-buying power through their websites. They include companies like Groupon, BuyWithMe, and Living Social, which offer various discounted offers such as adventure activities and restaurant coupons.
There is a high threat of entry into the travel industry as low capital requirements are needed because no physical products are being provided. Also, distribution channels, like online marketing, are easily accessible. Legal and governmental barriers are also low because most countries only request a travel agent licence (Seow et al., 2021).
Company reputation is the most significant entry barrier because it is needed to get attractive supplier deals. Famous companies like Expedia and Agoda have an advantage over new companies because of their established customer base and brand awareness.
Threat of Substitute
While many businesses offer lodging and other travel-related services, they find that regular transportation, expensive lodgings, and low-cost purchases bring in the greatest income. Most of these companies are categorized into group-buying travel-oriented websites and traditional online booking of resorts and hotels (Sarker, 2022). Companies like Airbnb and Escapes represent old-style online booking of resorts and hotels. They provide a variety of accommodations and offer discounts on their packages, such as tour packages, car rentals, and resort booking in one package. They secure low prices by eliminating resellers and directly accessing the vendors.
LivingSocial Escapes is an example of a company utilizing group-buying travel-oriented websites to provide discounted travel experiences without using the model of group-buying. These companies gain strength from evolving from group-buying websites to providing numerous resources, a solid consumer base, and an experienced team (Ye et al., 2019). These companies provide a moderate threat of substitutes because most offers are directed towards everyday leisure and business travellers. Consumers of these substitutes focus more on quality travel and care less about price competition.
Industry Risks and Attractiveness
Based on Porter’s three competition assessments conducted, key players and the level of threat have been determined for every source of competition. First, the threat level of the threat of entry is high (Martin-Fuentes et al., 2020). The leading players providing fierce competition include Booking.com, Groupon, and Fox World Travel. Secondly, the threat level in industry rivalry is low. The key players in this segment include Kiwi Collection, Cox & Kings, JetSetter, and Voyage Prive. Lastly, the threat level in the threat of substitutes is moderate. The leading players include Airbnb, LivingSocial Escapes, and Expedia.
Business Strategy
Market Entry
Many advantages support the entry of the travel agency into the market. The business venture can quickly obtain the prerequisites and licenses needed to conduct the travel agent business (Zhu et al., 2021). The business can begin showcasing exciting locations like London and New York, globally identified as attractive destinations. The travel agency will acquire its first package by connecting with relevant transport suppliers and tour activity operators.
The agency will acquire a reliable platform to support sales and online booking. The agency plans to stress computerized online payment bookings and manual payments via the phone. The tour operator system will be set to accept Visa, MasterCard, and PayPal payments for online bookings (Marin-Pantelescu et al., 2019).
There will be better customer service and a better transaction fee for those who pay manually over the phone. The business will contract tour guides, travel show hosts, and photographers to deliver the actual tour. It will start building marketing material to market to online users in the United States, Germany, and the UK. The momentum of the launch will be captured through professional video and picture footage for the following tours.
Featured Services and Products
The travel agency will deliver featured products to its clients in an exceptional Chic Experience in the best tourist destinations. Entertainment, transportation, activities, and accommodation are the constituents of a Chic Experience (Pradini et al., 2022). The business venture will provide an exceptional experience by basing their tours on special occasions that certain activities, like accommodation, can complement. Distinguishing the experiences will assist in obtaining a premium cost for the tour. The tour will be completed by collaborating with suppliers for activities and transportation that will be selected based on professionalism and excellent customer service.
SWOT Analysis
Strengths
Firstly, there are minimal upfront financial expenses because the travel agency only acts as a go-between for vendors and customers, not one that actually provides goods. In addition, the business can obtain deals directly from hotels and tour operators to offer the best local and international prices on accommodation and travel (Shaw, 2019). Secondly, the business has a strong, skilled, and equipped team willing to work to fulfil the client’s needs and gain value for their money. Lastly, the travel agency’s strong brand image will offer consistency and value to local and international tourist services.
Weaknesses
First, the business lacks additional starting capital essential in increasing the market penetration rate on the development of the brand. The travel agency has not secured the third-party investments required to aggressively enter a market with low entry barriers (Talwar et al., 2020). Secondly, the business venture lacks significant experience, leading to a learn-on-the-job approach. Consequently, it will result in longer decision-making processes and might take longer to execute some tasks.
Opportunities
First, based on the number of families, corporate organizations, and people travelling every day, the business venture has an opportunity to increase its client base. Online marketing and social media will also likely increase the client base through promotions targeted towards appropriate audiences (Arruat-Padis, 2022). Another opportunity for the business is the new emerging markets that lead to the rising demand for tourism. Also, people now have access to better income resulting in the rise of the market share over the next coming years.
Threats
First, low entry barriers, such as little starting capital, are a significant threat to the business venture. These businesses can have the expert knowledge to provide quality tailored services that can provide a wave of competition when they enter the market (Tu et al., 2021). Secondly, some favorite travel destinations, such as china, are still under lockdown due to the COVID-19 pandemic, and customers will not be willing to travel to those areas.
Financial Strategy
Funding Options
The travel agency might need a startup cost of about $100,000 to cater for marketing, travel software and licensing. The business has several options for financing from non-government and government programs (Stein, 2022). First, family and friends can buy equity securities that are publicly traded, which can provide a greater return than what the business can propose. Better liquidity can be obtained from these investments because they can be cashed out when needed.
The business can also obtain funding from seed-stage funding organizations like Sequoia Capital that offer seed money, connections, and advice. Seed money is funding for market research costs and early product development until the business is sustainable (Vogel, 2021). The business can acquire up to $25,000 in seed funding for the startup (Vogel, 2021). Lastly, the business venture can gain funding from government programs that endorse tourism, like the Cultural Events Fund (Vogel, 2021). The government also owns various banks, which it can use to finance startups like this.
Conclusion
In conclusion, the travel industry has achieved almost 2 billion arrivals globally and is expected to rise in the coming years. Technology has been the most significant player in the travel industry for both the consumer and the business. This business plan aims to create a strategic report for the travel agency to maximize its chances of success. The travel agency must obtain accreditation and licenses to launch the business. However, the business faces financial constraints in setting up the business for an official launch. In addition, the business needs employees with essential skill sets to run the business. Nonetheless, specific plans are in motion to ensure the business enters the market successfully.
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