TRAVEL MANAGEMENT COMPANIES

AND TRAVEL AGENCIES (TM)

Learning Outcomes

At the end of this lesson, you are expected to:

1. Describe travel management companies and travel agencies.
2. Explain the five basic functions of travel agencies/TMCs.
3. Discuss the advantages of TMC/travel agency.
4. Enumerate the various sources of revenue of a TMC/travel agency.
5. Explain the Organizational Structure of TMC/ Travel Agency

Describe the Travel Management Companies and Travel Agencies

Have you ever tried to plan for your travel vacation? It seems to be a very exciting
activity but you might end up disappointed in dealing with difficulties on how and at what
point you can start. There are so many concerns that should be arranged and rigid matters to
research on in traveling; whether looking for the best travel destination in magazines or
internet that can satisfy your limited budget, securing the necessary travel documents, plus
the hassle of packing your clothes and personal necessities.
It is really a good thing that there are travel management companies and travel
agencies that can guide, plan, and coordinate the plans for your dream vacation. Consulting a
travel company is the best solution, especially for beginners like you. Travel companies will
surely find the best travel deal that suits your needs. The Tourist Code of 1980 under Article
243, describes the travel and tour agency as “an entity engaged in the business of
extending to individuals or groups, travel services, and assistance to include

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documentation, ticketing, booking for transportation and/or accommodation;
arrangements, handling and/or conduct of tour within or outside of Philippines,
whether or not for a fee, commission or any form of monetary consideration.”

The Traditional Trend

In the traditional way of selling travel products, travel agencies act as middlemen
between the vendors and vendees. Vendors pertain to commercial entities such as hotels,
resorts, airlines, cruise and tour bus companies, amusement parks, and others; travel agencies
serve as the agents to market their product or services offered. On the other hand, vendees
pertain to you or any person who buy the products offered by the vendors; in this case, travel
agencies provide guidance on customers.

Can the vendee go directly to the vendors to avail of their products or services? The
answer is yes; but as explained earlier, it can be a rigid task. Furthermore, vendors do not
have the luxury of time to answer every customer’s inquiry, that is why they prefer to create
agreements with travel agencies to let them promote and explain the products and services
that they offer in detail. As stipulated in the law, travel agencies have the right to collect
commission from the vendor. This may range from 10% to 15% of the selling price
which can be defined as “rate-minus”. Aside from this, the travel agent can also impose
markup on the net cost of products forwarded by the vendor or known as
“net-plus” which are normally beyond the understanding of the customer.

The New Trend

Innovations brought by the computer technology have great impact on the way travel
agencies function nowadays. Through the internet, people can already book their flights
directly with airline companies, reserve for rooms on different hotels through the Computerized
Reservation System (CRS) and a Global Distribution System (GDS). This time, travel agency is
no more an agent for the vendor or a seller to the vendee; but a partner to both of the
parties. They are now called as Travel Management Company (TMC).
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 A TMC is responsible for providing assistance to the vendees in terms of finding the
best supplier of travel products that can satisfy their needs at their convenience and with their
purchasing power. TMCs conduct evaluation of the vendee to determine preferences and
budget then find the best match based on the vendors audited assets. TMCs will also manage
and negotiate with all travel processes of the vendee. In return, TMCs will explain and charge
a professional fee from the vendee or the “cost-plus”. Unlike “net-plus”, the “cost-plus” is
openly communicated to the vendee.

Advantages of Travel Management Company (TMC) /Travel Agency

Which of these ways do you think would be the best thing to do to find the best travel
deal that suits your budget: browsing the magazine, searching the internet, or consulting a
TMC/travel agency? Majority of you might choose the second option which is browsing the
internet. Well, you are right that the World Wide Web is really a good source to search on and
many travelers today transact their travel deals online. However, it is also true that many travel
deals posted on some websites are only scams or may have some hidden charges behind the
declared deal rates. In this case, you would need somebody or an expert to help you out in
finding the right travel deal that will not go beyond your budget such as travel management
companies or travel agencies.
Here are some of the advantages that customers may get from booking in a
TMC/travel agency:
1. They are experts in their field - Travel agents will surely find the best travel solution
since they are professionals in doing this kind of job every day.
2. They conserve time and effort for you – They gather information from suppliers and
clients, arrange company agreements, coordinate details of the travel plans and file the
needed documents. You have nothing to worry about because somebody is doing the tasks for
you.

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3. They know the best supplier – Travel management businesses have a wide range of
company linkages and profiles. They compare price rates and marketability of the travel
products from one company to another and will not stop until they find the most economical
and desirable deal for you.
4. They take charge of responsibilities – Whenever things go wrong, conflicts are
immediately resolved by the company since travel agents have direct attachments to
customers. Unlike online travel transactions, there is no guarantee that your problems will be
addressed since some hotline centers of online agencies may either be understaffed or not
existing at all.

Classification of Travel Agencies

1. Full-service travel agency – provides all services and products related to domestic
and international travels. It is capable of handling all kinds of travel from holidays to
business trips, either for an individual or a group. The smaller type of this agency within
residential areas gives more focus on leisure travel. Larger agencies located in
commercial areas are more focused on business travel.
2. Corporate / business travel agency – deals with job-related and incentive travels.
It provides services for the travel needs of business or corporate clients.
3. In-house travel agency – a company or corporation’s dedicated travel agency. It
caters only to the business and sometimes even leisure travels of their own employees.
4. Specialty agencies – provides services for specific market segments such as senior
citizens, incentive groups, and adventure travelers.
5. Online travel agency (OTA) – operates exclusively through websites. It offers
comprehensive travel shopping including airline tickets, accommodation, and car rental.
Examples of OTA are Expedia, Orbitz, and Travelocity.

Travel Intermediaries

Travel agency acts as the mediator for the clients, it is a venue where an
individual can seek information and expert advice, and make arrangements to travel by
air, sea, or land to any destination. Travel agencies also serve as retailers of travel
products and services that are supplied by larger travel enterprises. Travel services may
include booking (transportation and accommodation services), documentation, and
managing and facilitating the tour within or outside the country, as well as tour
activities.

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 Tour operators serve as wholesalers since they create and design packages
that include transportation, accommodation (hotels), and tourist attractions
(destinations) all for the price of one and sell them to travelers by channeling the
packages to travel agencies.
In the Philippines, tour operators can be both wholesalers and retailers. Majority
of the tour operators seldom make transactions directly with the travelers.
The charts below show the fundamental differences in terms of operation
between travel agents and tour operators.

Tour Guide Services

Traveling requires a lot of learning about the places, including the culture and history of the
people living there. Often, this can be a major setback for travelers to truly enjoy their travel

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adventure. Having a travel guide offers a better experience in achieving the full benefits of
traveling. A tour guide is a person who directs travelers and tourists on designed
itineraries and destinations based on standards set by the entity he/she works for.
Tour guides can accommodate both domestic and foreign tourists. They are responsible
for providing information on history and culture, significant landmarks, and other related
matters for the duration of the travel, as well as the activities that tourists may engage in.
They are also in charge of transportation services and ensuring the comfort and safety of their
tourist clients.

Functions of Travel Management Companies/Travel Agencies

The travel management company/travel agency has the following major functions:
1. Provide reliable information to clients – Travel agents are good seekers of travel
information in terms of suppliers’ profile, their product prices, schedule of activities, and travel
documents required. Unlike before when travel agents manually gather data through calling
every commercial establishment just to compare prices, the use of internet today is a
breakthrough in accomplishing these sorts of jobs. Here are other means and sources that
TMCs use to gather relevant information: travel guidebooks, business travel planner, the Star
Service of hotels and cruise vessel, travel documentaries, and most importantly, review of
personal experiences from travel forums.
2. Recommend travel products that suit the clients’ needs – After determining the
traveler’s preference and budget, the next step is to find the right suppliers of products that
can satisfy the requirements of the client. At this point, suggestive selling comes in wherein
travel agents recommend various product inclusions or selections on the deal that will not go
far from the client’s buying power such as deciding the appropriate airline and flight schedule,
travel destinations, incentives, and others.
3. Guide travelers in obtaining travel documents – One significant benefit in consulting
TMC is the guidance that they provide in securing for your travel documents such as
immigration clearances, passport, and visas. In several travel destinations, some of these
documents are not required especially for local travels. But as TMC determine the needs, they
provide assistance to travelers in obtaining these documents, for a fee.
4. Arrange and coordinate travel activities – At this point, a TMC will now place
reservation to suppliers, make travel arrangements, and issue corresponding proof of
reservations to the traveler such as tickets or tour vouchers after he agrees with all
recommendations laid by the TMC. Therefore, the traveler is not anymore, an alien to the
travel company but a “client”.

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5. Provide assistance in case of refunds or cancellation of deal – There are times that
the client decides to revoke his deal with the travel company due to unexpected
circumstances. TMC will also assist the clients in processing cancellations or better provide
recommendations to make adjustments on travel arrangements, if possible.

Sources of TMC Sales and Revenue

There are various ways on how TMC benefit from processing travel arrangements of
clients:
1. Professional/Handling Fee – This pertains to fees charge to clients for the professional
services rendered by the travel agent in gathering travel information, advising, and processing
travel arrangements. Professional fee is either a fixed amount or percentage of the travel cost.
This is referred to as the “cost-plus”.
2. Sales Commissions – These are either a form of commission from regular product fares
charged to supplier or known as “Rate-Minus”; or a markup on net product fare passed on the
client or “net-plus”
3. Service Fee – These are fees collected from clients for some services incurred in addition
to the regular travel functions such as assistance in securing travel documents, and processing
of documents due to some adjustments from the original travel arrangement.
4. Incentives and Rebates from suppliers – As regular agents to suppliers, TMC
sometimes receive incentives and rebates of any form as an act of generosity and appreciation
on the part of suppliers.

Organizational Structure of TMC/ Travel Agency

Arranging every details of your travel plan is definitely not an easy thing to do. That is
why many are letting the travel management companies do these rigid tasks for them. But,
how is it possible that a TMC is able to arrange numbers of travel dealings every day without
compromising its credibility and work efficiency?
It is because they have organized teams that function simultaneously according to the
designated responsibilities. As a service industry, a travel management company/travel agency
is committed to perform the following roles:
1. As Retailer – it buys travel products from suppliers (travel-related establishments) and sell
them to buyers (the consuming public).

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2. As Agent – it negotiates and help the suppliers in distributing travel products to the end
user or client 3. As counselor – it guides the clients in using the best travel products that
suits their needs.
4. As Profit Earner – it generates revenues from every service rendered to suppliers and
clients such as professional fee (cost-plus), rate-minus, net-plus, and service fee from auxiliary
services.
A travel management company/travel agency is often composed of the following
essential departments represented by the General Manager as chairperson:

Travel Agency/TMC sample organizational chart

1. Administration – conducts the daily management of the company. The department

consists of three sections: general administration, personnel, and accounting / finance.
a. General Administration
This section has the following tasks and major areas of responsibility.
● Takes care of the legal aspect of the organization
● Oversees the insurance needs of the company
● Purchases and maintains office equipment and tools
● Formulates company policies
● Takes care of standard operating procedure, company forms, filling systems,
and electronic data information processing systems
b. Personnel
The following are the tasks performed by the personnel section.

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 ● Hires and screens personnel
● Responsible for policies and compensation schemes
● Involve in performance evaluation
● Takes charge of staff training and education
c. Accounting / Finance
The following are the tasks performed by the accounting / finance section.
● Keeps records of licenses, permits, and other important business documents
● Has custody of accounting forms
● Implements company policies concerning billings, credit and collection
● Plans the budget and monitors payables and receivables
● Acts as custodian of all the money collected and disbursed
2. Operations Department – effectively and efficiently manages the delivery of services
to the clients. This business unit also acts as intermediary to travel suppliers and service
providers or vendors.
Below are the list of personnel in the operations department and their functions.
a. Travel Manager / Supervisor
● Manages travel operations team
b. Travel Counselor
● Provides relevant travel information to prospective clients
● Recommends products that are appropriate to client’s requirements and
needs
● Updates oneself with travel information and trends
● Fills out travel information in the booking card for travel
● Monitors travel document processing and its release
c. Reservation Officer
● Places reservation with the suppliers
● Follows up the reservation and monitors reservation changes
● Finds an alternative supplier in case the preferred supplier is unavailable
● Monitors the issuance of travel vouchers and tickets
d. Ticketing Officer
● Sources and calculates fare correctly
● Issues air tickets manually or through an automated ticketing system
● Issues purchase order of the client’s itinerary
● Checks the accuracy of travel documents
● Re-issues tickets if needed
e. Liaison Officer

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 ● Determines the needed travel documents and visas
● Checks the authenticity of submitted documents
● Ensures the timely release of documents
● Arranges and coordinates appointments
● Visits various consulates and government offices
3. Marketing and Sales Department – Marketing and Sales are segmented activities
which aim to uplift the sales revenue of the TMC. Marketing pertains to any activities
that may cause public awareness about the company and the product or services it
offers. When marketing plans are effectively communicated to the masses and many
become interested to avail the products, it will result to increase in sales which the
Department is targeting for. The Department is headed by the Sales and Marketing
Manager.

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