A person who operates a tour company is a broker. A broker is a middleman. Brokers buy or arrange items or services and sells these items or services to the end buyer. Some examples of brokers are:
Independent insurance agents. These agents do not provide insurance; they arrange insurance for you from an insurance company. Insurance agents usually get a commission from an insurance company.
Stock brokers. Like insurance agents, stock brokers help you buy and sell stock. They don’t own the stock. These brokers also receive a commission based on the amount sold.
Real estate broker. Again, these brokers do not own the properties they sell and they get a commission based on the value of what they sell.
There are also tour brokers. Tour brokers serve a variety of customers. This article is about what a tour brokerage is and the basics of this business.
Here is a good description if what a tour is: A trip with visits to various places of interest for business, pleasure, or instruction.
Here travel is defined: To go from one place to another, as on a trip; journey.
A tour, then, is not only travel but it is travel with the purpose being pleasure or interest. You may think of a tour as extended travel with the object being to see and experience an area. Travel, on the other hand, is usually only about moving from one place to another.
A tour broker works with people on a continuous basis. If you are going to get involved in this type of business you should like working with people – you have to be a people person.
Tour brokers are not travel agents. Travel agents arrange for the travel needs of their customers. Usually a travel agent will only work with individuals or small groups (families, for example). Travel agents also always buy something that is already in place (air travel, car rentals, hotels, etc.), they do not originate anything.
Tour brokers originate – they arrange tours, they arrange the transportation, they arrange the lodging, they arrange the meals, and they arrange other services for their clients. A tour broker plans on what kind of tour he/she wants to operate.
Next, the tour broker makes arrangements for the various components of the tour – transportation, food, lodging, attractions, etc.
There are many types of tour companies. Some offer guided tours of a local area – tours of a city or an attraction, for example. Some offer tours in a natural setting – guided tours through the Grand Canyon fall into this category. Some offer tours to various national and state parks. Some offer tours through a large area, a multi-state tour is a good example.
IF YOU LIKE TO TRAVEL – FOR FREE – THIS IS A GREAT BUSINESS TO BE IN
You may have to do inspections of the hotels and attractions that you will be making a part of your tour. If you have been taught correctly you will know how to get “comp” (short for complimentary or Free) rooms and meals. If you will go along with the tour, you should expect to get comps again. How to set it up so that you get comps is something your mentor should teach .
NOTE THAT THE INFORMATION PROVIDED HERE ONLY APPLIES TO THE US. OTHER COUNTRIES MAY HAVE DIFFERENT RULES
As I mentioned before, this is a people business. Liking to work with people and liking to solve problems is a prime requirement.
Like a church is a church because someone calls it a church, a tour broker is a tour broker because someone says that they are a tour broker. There is no requirement for a license. If you do operate a business there may be a need for you to get a federal tax number and your county or city may require you to get a business license. As far as needing a license to become a tour broker – there is no license required. From the mid 1930’s until the 1980s transportation was strictly controlled by the Interstate Commerce Commission (ICC). Under the Deregulation Act of 1982, competition was allowed and the need for federal authority became a thing of the past.
Depending on where you are you may need some sort of business license. Call your local county office and ask for the office in charge of business licenses. This should be easy as all they really want is for you to file some paperwork and pay them a small fee.
If you are going to be making money (and why else get in the business?) you are going to have to get a federal tax number. This number is called a Tax Identification Number (TIN) and is used in business much as your Social Security number is used for benefits.
I have looked at various sites on the Internet purporting to be concerned with how to become a tour operator. Most do not seem to understand what a tour operator is or does. Those which got close to the concept either offers to teach or provided links to sites which may prepare someone how to be a tour guide. A tour guide is not a tour operator – at best, a tour guide works for a tour operator.
A tour operator runs his/her own business
It’s as simple as that – you own and run the business. If you plan to make a profit you follow this rule – buy low, sell high. People tend to make things too difficult. You buy at one price and sell at another price, easy, huh?
The real “trick” to making money in the tour business is to understand that concept of breaking even (BE). The break even point is where you don’t lose money and where you don’t make money. To help you understand this idea you have to understand that there are two types of costs in most businesses – fixed and variable. A fixed cost is one that will occur whether you have 10 clients or 46. Office rent is a fixed cost. You have to pay the rent whether or not you operate any tours. A variable cost is a cost that is dependent on something else. An example of a variable cost would be the cost an attraction (theme park). If you have 20 clients the total cost of the attraction is dependent (variable) on the number of clients you have.
The lack of good information on this business led me to believe that those in this business do not want competition or they don’t have time to write about how they run their business. A well thought out tour, advertised correctly, can bring in thousands in revenue. For example, suppose that you operate a seven- day bus tour. The tour sells for $985.00 (per person, double occupancy) and you have 36 people go on your tour. The gross revenue on this tour will be over $35,000.00 and you should be able to retain at least $10,000.00 of that amount.
IS THIS THE SORT OF BUSINESS FOR YOU?
It is possible to may some serious money in this business – you could also lose money. Here are some basic requirements that you should have before starting such a business.
You should like working with people
You should not panic when things go from good to bad to even worse
You should be able to organize things easily
You should have at least a working knowledge of certain computer programs – word processing, spreadsheet, e-mail
You should have a copy machine and a fax machine
You should have at least one telephone
You should have at least one fairly up-to-date computer
What sort of tours and what do I do next?
The world is your oyster
This is really the fun part – you can go anywhere! Successful brokers operate three-day tours from Denver into the nearby Rocky Mountains and seven-day tours to Branson, Missouri. Brokers on the east coast offer tours into New England and parts of Eastern Canada as well as longer tours into the American southwest.
Brokers in Seattle do a good business operating tours into the Copper Canyon of Mexico. Some brokers offer tours to musical events, art showings, and short trips to New York City for Christmas shopping.
Where to go is up to you as long as you keep it reasonable. Going to Iraq now may not be the best choice but there is a company in the UK offering and operating tours into Iraq – make sure that your clients sign many disclosures stating that you are not at fault in case of your death. Given the current state of the economy it may be wise to limit your offerings to North America but tours to Costa Rica seem to sell very well.
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