package tour operator meaning

What is a tour operator and how does it work?

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The tour operator is an integral component of tourism , yet many people are unclear about what a tour operator actually is or what they do.

In this article I will explain what a tour operator is and why tour operators are important. I will also talk about what the difference between a tour operator and a travel agent is, as well as the different types of tour operators.

What is a tour operator?

Definitions of tour operator, importance of tour operators, the difference between a tour operator and a travel agent, what does a tour operator do, products and services sold by tour operators, inbound tour operators, outbound tour operators, domestic tour operators, ground tour operators, the association of independent tour operators, the tour operator: to conclude.

Tour operators are inextricably linked to the package holiday model. The tour operator is the person or organisation who creates the package. A travel agency is then used to sell the package holiday.

In the chain of distribution , the tour operator is represented by the term ‘wholesaler’. This is because the tour operator is responsible for purchasing products of services in bulk and then redistributing them as a packaged product to consumers.

To put it simply, a tour operator is the person or organisation who takes the individual elements of a holiday (e.g. transfer, hotel, transport) and packages these together.

The types of package vary. Most commonly, tour operators are associated with mass tourism and the traditional package holiday market. However, tour operators do also play an important role in the production of niche tourism products and services too.

If you’re looking for a formal definition of a tour operator with a reputable source, you may want to reference Polyther, who in 1993, defined the tour operator as;

‘[an organisation or person] who has the responsibility of putting the tour ingredients together, marketing it, making reservations and handling actual operation’.

Similarly, Holloway (1992) states that;

tour operations undertake a distinct function in the tourism industry, they purchase separate e lements of tourism products/services and combine them into a package tour which they sell directly or indirectly to the tourists .

The Organisation for Economic and Cultural Development (OECD) define a tour operator as follows;

‘Tour operators are businesses that combine two or more travel services (e.g., transport, accommodation, meals, entertainment, sightseeing) and sell them through travel agencies or directly to final consumers as a single product (called a package tour) for a global price. The components of a package tour might be pre-established or can result from an “a la carte” procedure, in which the visitor decides the combination of services he/she wishes to acquire.’

Tour operators are an important part of the tourism industry .

Tour operators make the logistics of organising a holiday much easier for the consumer. This makes people more likely to travel, more often.

Tour operators have a lot of power. If they choose to sell holidays in a particular location, for example, then that location will receive many of the associated positive and negative economic impacts of tourism .

Tour operators are often vertically or horizontally integrated with other organisations, such as travel agents and airlines. This allows for easier management and distribution of products.

Tour operators typically build holidays en masse. This means that economies of scale play a key role in driving down prices- the more you produce the cheaper the product becomes! This is obviously beneficial to the consumer and helps travel agents to have a competitive advantage when selling holidays.

Many people are not aware that a travel agent and a tour operator are actually two totally different organisations and they are not aware of the difference between a tour operator and a travel agent.

In fact, it is quite easy to understand this difference!

A tour operator is the organisation which puts the different elements of a holiday together. And the travel agent is the organisation who sells it to the consumer.

Whilst this differentiation is pretty easy to comprehend, it is easy to understand why people get tour operators and travel agents confused. This is largely because many organisations will operate under the same company. For example, TUI has a tour operator and a travel agent (and an airline too). As a result, many people do not realise that in actual fact, there are two separate organisations doing two separate jobs.

Ultimately, a tour operator is responsible for putting the different elements of a holiday together into a commodified package.

To do this, there are a number of different roles and responsibilities that tour operator staff will have. This includes:

• Data analysis- which destinations will sell best, how many holidays should they sell etc
• Assessing suitability of accommodation, transfer and transport options
• Liaising with stakeholders e.g. coach operators, airlines, hoteliers and resort representatives
• Negotiating contracts
• Confirming reservations with airlines/hotels
• Managing and responding to customer feedback
• Undertaking market research
• Production of marketing material
• Providing pricing information
• Handling bookings, invoicing and issuing of tickets
• Working with travel consultants from different travel agencies to put holiday packages together

Tour operators have a number of products and services that they sell, depending on their specific business model, business intentions and target market. A tour operator will typically package together two of more elements to form a packaged product, which is then sold at an inclusive price.

Examples include:

• Package holidays
• Accommodation
• Information on destinations
• Representative service in resorts

Types of tour operator

Tour operators come in all shapes and sizes. Some are large, multinational organisations and other are small, independent business.

Different types of tour operators develop products for different types of tourism . This can include the mass market, niche tourism market, special interest tourism, the luxury market, tailor-made products and dynamic packages .

There are four different types of tour operators, which I will explain below.

• Inbound Tour Operators
• Outbound Tour Operators
• Domestic Tour Operators
• Ground Operators

An inbound tour operator is one who facilitates inbound tourism .

The aim of an inbound tour operator is to bring tourists in to a particular country or countries.

Inbound tour operators will often collaborate with local travel agencies and transport operators to facilitate travel arrangements for their customers.

Inbound tour operator example: A group of German tourists conduct a tour of China, encompassing a visit to Shanghai , Hangzhou and the Yellow Mountains . The tour operator who organises their travel is Chinese-based company China Highlights . This company is based locally in China and they offer local, Chinese tours.

An outbound tour operator is one who facilitates outbound tourism .

The aim of an outbound tour operator is to send tourists out of a particular country or countries.

Outbound tour operators will often collaborate with foreign travel agencies and transport operators to facilitate travel arrangements for their customers.

Outbound tour operator example : A family of four from Liverpool, UK want to book an all-inclusive summer sun holiday in Alicante. They book through TUI , the largest tour operator in Britain, who specialises in outbound travel. They are based in the UK, but they work with foreign partners to facilitate holidays overseas.

A domestic tour operator is one who facilitates domestic tourism .

The aim of a domestic tour operator is to organise travel within a particular country or countries.

Domestic tour operators will often collaborate with domestic travel agencies and transport operators to facilitate travel arrangements for their customers. Domestic tour operators will often also serve the inbound tourism market.

Domestic tour operator example : A group of twenty-something boys from Chicago want to travel to Florida for the spring break holiday. They want to do a tour of the local attractions in the area and have some time to relax on the beach . They organise their travel through the tour company, Trek America . Staff at this company are experts in domestic travel within the USA.

A ground tour operator is an organisation who dopes the ground work as grass roots level.

Many tour operators do not have connections in all places around the world, therefore they build a network of connections to help them run their business.

Essentially, some of the work is passed on to a third party, known as a ground operator. This work may include negotiating local contracts, liaising with local suppliers and providing market data, amongst other things.

This is especially common for small tour operators.

You may also hear ground tour operators referred to as handling operators or handling agents.

Ground tour operator example : A backpacker wants to ‘give something back’ and book a volunteer tourism holiday in Kerala. She wanted to use a known and trusted tour operator to book her trip so she booked it with Intrepid Travel . Intrepid Travel create and sell adventure holidays all over the world, and it is impossible for them to have contacts and every staff in every corner of the globe. Therefore they work with local ground operators, who do the work on the ground. In this instance, the ground organisation is Iris Travel – a tour operator based in Kerela, India.

The Association of Independent Tour Operators , abbreviated as AITO, is a travel industry trade group (like  ABTA  or ATOL) based in Britain. They launched in 1976.

The AITO represents around 120 independent  tour operators  across 200 countries.

These tour operators provide access to a huge range of activities including city breaks, safaris, luxury holidays and much more. The AITO is based in Twickenham, south-west London.

The AITO does a variety of things. Most importantly, you can be reassured that your holiday is well-protected thanks to the Association of Independent Tour Operators.

They assess every member financially as well as by their own business practice code before granting membership; this means that you are guaranteed clear and accurate descriptions of holidays as well as tour standards that are consistently monitored.

Tour operators are an important part of the tourism industry, and with AITO, you have added security when booking your travels through a tour operator. Hopefully after reading this article you are now confident with what a tour operator is, how these organisations work and the different types of tour operators operating the market.

If you liked this article, why not take a look at these too?

• Types of travel agents | Understanding tourism
• What is e-tourism and how is it changing travel?
• 10 jobs in travel and tourism that will be BIG in 2022 and beyond
• What does the World Travel and Tourism Council do?

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Who is a Tour Operator? Know Roles and Responsibilities

If travel destinations and tourist places are something that interest you or fill you with enthusiasm, probably then, you must know about a tour operator. Tour operators advise customers about different travel options. They organize tours for individuals or different groups of travelers. As professionals, they prepare tour itineraries, and tour packages and coordinate with vendors for your holidays.

In this write-up, we delve into a tour operator’s roles and discuss the necessary skills, roles, and education qualifications for the job.

Who is a Tour Operator?

A tour operator is someone who belongs to the hospitality industry. He organizes tours and helps customers during trips so that they have positive reviews. Advising customers on different tour packages based on their budget and interests, and handling all logistics of a tour, such as booking tickets and accommodations, are some basic roles assigned to them.

Tour operators generally work for travel agencies or tour companies A tour guide will accompany tourists on their trips, but tour operators are solely available to answer their questions. They provide detailed information about tourists’ itineraries.

Types of Tour Operators

Here are some types of tour operators who can help you plan your holidays better and make them memorable!

1. Domestic Tour Operators

 Domestic tour operators provide tours and travel services within their own country. They serve tourists who desire to explore different regions or attractions within their country.

2. Inbound Tour Operators

These operators serve foreign tourists visiting their country. They plan and organize tours within their own country, and provide services such as transport, accommodation, guided tours, and activities.

3. Outbound Tour Operators

Outbound tour operators organize tours for residents of one country traveling to another country or countries. They arrange the trip, including flights, accommodations, transportation, and activities at the travel destination.

4. Special Interest Tour Operators

These operators specialize in planning tours catering to specific interests or hobbies, such as wildlife safaris, culinary tours, photography tours, adventure travel, or cultural immersion experiences.

5. Wholesale Tour Operators

Wholesale tour operators sell pre-packaged tour products in bulk to travel agencies or retail outlets. They often provide discounted rates to travel agents. Travel agents usually earn a profit by reselling the tours to clients.

6. Incentive Travel Companies

These companies organize travel experiences for corporate groups or organizations as rewards or incentives for employees or clients. They often tailor trips to meet the guided objectives and preferences of the organization.

Tour operators design and organize pre-packaged tours or holiday packages while the Travel agents help clients in booking individual travel components.

What is the Role of a Tour Operator?

Tour operators play a wide array of roles when it comes to planning holiday packages and dealing with tourists.

1. Planning Tour Packages

These professionals design and schedule travel packages for individual travelers or groups of tourists. They coordinate with their clients to discuss their likes and dislikes and then suggest a range of attractions, accommodations, and transportation options to enable the clients to select the tour packages that meet their preferences.

2. Negotiating Rates

Often the tour operators can try to book a group of room /blocks in a hotel for their bigger group. This leads to lower rates for the tourists.

3. Arranging Travel

Tour operators ensure that passengers have their train tickets to travel between the cities or even book a car rental to help customers visit the attractions according to their schedule.

4. Providing Customer Support

A tour operator offers travelers with the technical assistance that they may need before a trip. For example, they may reply to customer questions about a trip they are planning, tell them about currency exchange rates, or notify them if there are any changes in their itinerary.

5. Preparing Tour Budgets

A tour operator comes up with different price options with sample itineraries and counsels customers on the kind of lodging and attractions that are within their budget.

6. Researching Travel Options

Tour operators are specialists who gather and study data on traveling patterns to suggest itineraries to tourists about where they should go, where they will stay, and where they can eat on their trips.  

They read articles and browse online for details about travel trends and popular tourist spots that they can use to stay updated with what is trending currently.

Educational Requirements for a Tour Operator

To become a tour operator you need a high school diploma or equivalent. Some employers, particularly tour companies or travel organizations, may prefer to hire candidates with a bachelor’s degree.

Tour operators need a degree in tourism and travel services management or hospitality management. Many colleges and universities offer these undergraduate programs, and it typically takes four years for students to complete their degree. You can also consider doing short-term courses in the following streams.

• Hospitality finance
• Foundations of tourism
• International hotel management
• Tourism information technology
• Hospitality management strategies
• Sustainable tourism planning
• Revenue management
• Service technology
• Event planning
• Human resources management
• Hospitality sales and marketing

Difference between Travel Agent and Tour Operator

Tour operators and travel agents both play important roles in the tourism industry, but they have distinct functions and responsibilities. Let’s differentiate between the two.

Travel Agent :

A travel agent is an individual or a company that acts as an intermediary between travelers and travel service providers. They may specialize in certain types of travel, destinations, or services.

Travel agents typically earn commissions from the travel suppliers they book with, rather than charging clients directly for their services.

They assist clients in planning and booking the trip, including flights, accommodations, transportation, and activities.

Tour Operator :

A tour operator is a company that designs, organizes, and sells pre-packaged tours or holiday packages to travelers. Tour operators handle all aspects of the tour, including accommodations, transportation, meals, guided tours, and activities. They often work with travel agents to sell their tour packages to clients.

They may specialize in specific types of tours, such as adventure tours, cultural tours, luxury tours, or eco-tours. Tour operators also offer customized tour packages tailored to the preferences and needs of individual clients or groups.

Wrapping Up

The profile of a tour operator is special as it blends creativity, expertise, and impact. Tour operators have the privilege of turning travelers’ dreams into reality by crafting unique and immersive travel experiences tailored to specific interests and preferences.

They have an extensive knowledge of travel destinations, coupled with strong connections with local suppliers. This enables them to offer better service and access to exclusive travel opportunities.

Check also: Best Places to Visit in Kashmir

Moreover, tour operators play a crucial role in promoting sustainable tourism practices as they support local communities, and preserve cultural and natural heritage. Although they may face challenges such as changing rules and unforeseen circumstances, tour operators show professionalism in ensuring the safety and satisfaction of their clients.

A tour operator designs organizes, and sells pre-packaged tours or holiday packages to travelers. They plan and coordinate all aspects of the tour, including accommodations, transportation, meals, guided tours, and activities.

They also negotiate contracts with travel suppliers such as hotels, airlines, transportation companies, and tour guides. A tour operator promotes tour packages to attract clients.

Moreover, they assist and support to travelers before, during, and after the tour. They also ensure compliance with safety regulations and provide a high-quality travel experience.

While both tour operators and travel agents are involved in the travel industry, they have separate roles and functions.

A tour operator specializes in designing and organizing pre-packaged tours or holiday packages for travelers. They handle all aspects of the tour, from transportation and accommodations to planning activities and excursions.

On the other hand, a travel agent acts as an intermediary between travelers and travel service providers. They assist clients in planning and booking various aspects of a trip, such as flights, accommodations, transportation, and activities.

Travel agents may work with tour operators to sell their tour packages to clients, among other services.

A tour operator designs and creates pre-packaged tour itineraries tailored to specific destinations or themes. They negotiate contracts with hotels, airlines, transportation companies, and other travel suppliers to secure competitive rates and check availability.

They handle all logistics related to the tour, including booking accommodations, arranging transportation, and organizing guided tours and activities.

They market and promote tour packages to target audiences through online platforms, travel agencies, and promotional events.

A tour operator provides assistance and support to travelers throughout the tour, including addressing any issues or concerns that may arise.

Finally, they ensure compliance with safety regulations and industry standards to ensure the well-being and safety of travelers.

Last but not least, a tour operator continuously evaluates and improves tour offerings based on customer feedback and market trends to improve the overall travel experience.

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Tour Package

Package holidays, popularly known as a tour package or simply the word ‘tour’ in the travel and tourism industry refers either to a package tour escorted or not escorted by the tourist guide.

When we say tour package, it means a pre-arrangement, prepaid trip that combines two or more travel components like airfare, airport transfer, accommodation, and other services . Practically, to define the tour package concept is complex one rather understand.

Holloway defines a tour package as “a total tourism product consisting of transportation from the market area to the destination, accommodation at the destination and recreational activities promoted by the tourists.”

According to Gregorg “a tour package is advertised journey including specific features, arranged and promoted with tour literature by a tour operator and paid for in full by the tourists  before starting the tour.”

Technically, a package tour/tour package is a total tourism product as it generally includes transport from the origin place to the destination, accommodation at an en route place or at the destination and other recreational or travel services. These components are purchased by an individual, firm or company called the ‘ tour operator ‘. He combines all the travel components in a package and sells them at all-inclusive prices to the clients.

History of Tour Package

The term ‘tour’ was in vogue as early as 1670. The Britishers traveled to widen their knowledge of the continent, especially to study the culture and social life. This practice was gradually adopted by other lovers of cultural centers.

The result of the process was that many European historic and cultural centers were opened to the British tourist. By the early 1730’s the small fishing resorts around the British coast begin to attract tourists seeking to their diseases by drinking the sea-water or by immersing themselves in it.

The introduction of a rail link between the major centers in 1830, had a profound impact on the pleasure travelers for the first time. Many entrepreneurs began to inspire rail travel by organizing excursions for the public at discounted offers.

However, to ‘the origin of package tour’ the credit goes to Mr. Thomas Cook in 1855 , Cook, extended his business operation to different countries by introducing the first ‘ inclusive tour ‘ to Paris.

Mr. Cook put together all the components of tourism products and sold them as ‘inclusive tour’ to the tourists. His pre-packaged tour inspired other tour organizations in the travel industry to organize similar tours to all parts of the globe.

Most of Cook’s tours were a linear tour i.e., the person went from place to place on a single destination. Basically, Mr. Cook developed the concept of ‘grand tour and escorted tour’, the concept which is still used.

Incidentally, World War II has tremendously developed the package tour concept because of the following reasons:

• Social and Economic Conditions
• Increase in Aircrafts
• Marketing Conditions
• Legal Requirements
• Integration took place.

Today, package tours are a vital segment of the world’s travel and tourism industry. According to WTTC, the package tour sales generate $25 billion annually in the United States, $18 billion in Europe, $19 billion in Britain, and $21 billion in Asia. Today tour sales represented 50 percent of all leisure travel sales and 35 percent of all travel agency revenues.

Types of Tour Packages

A travel agency/tour operator deals with variety of ‘tour packages,’ catering to the diverse needs of tourists such as adventure, beach, architecture, cultural, business, conference, incentive tours, ayurvedic packages, Buddhist, religious, incentive tour, special interest tours, cruise tour group tour, educational tour, heritage, monuments, wildlife lovers, etc. These are broadly classified into five categories :

• Independent Tours
• Escorted Tours

Hosted Tours

• Incentives Travel/Tours

Freedom Tours

Independent tour.

Independent tours are prepared/formulated for those tourists who want to travel independently. The components of such tours are air travel, air transfer, accommodation, travel documents, sightseeing, boat riding, entertainment, and other travel services.

However, in some cases, the tourists are free to purchase every single component separately. Thus, this type of tour provides the tourists considerable freedom to plan the activities according to their own choice.

An independent tour may or may not be an all-inclusive tour. Therefore, tour price varies depending on the type of air travel, air transfer, accommodation and is inclusive of other tour components. The foreign independent travel (FITs) and domestic independent travel (DITs) are examples of an independent tour.

Escorted Tour

When a travel agency includes the services of a well educated and trained tour manager in its package, the tour is called an escorted tour. Basically, escorted tours are meant for those travelers who are planning to visit a foreign country first time.

The escort’s responsibilities and duties are to provide comprehensive information and assistance to the group or individual traveler, at the origin, en route and the destination place. The excursion tours are the example of escorted tours.

A hosted tour means when an agency utilizes the services of another agency at a particular destination. Suppose a group of French tourists is coming to India. When the group arrives in India, they are greeted at the airports by TCI, which assists them in clearing their baggage and transfer them to the hotel.

Their tour-host (TCI) is available to offer device and information about the local attractions and entertainment. Further, when the group arrives at another designation in India, a different travel agency greets them at each tourist spot. Thus, a hosted tour provides the tourists maximum level of pre-arranged and personalized services.

Incentives Travel/Tour

It is a motivational programme or a fully paid holiday which is given to the employees by the enterprises as a reward. Mostly in medium and large-scale companies and usually too distant destinations to spur them in maintaining their track record, to increase output, improve the image and moreover to earn the long period loyalty of the employees.

There are a number of the other packages offered by a tour company such as a custom tour an excursion tour, an adventure, and special interest package tours.

Freedom tours are becoming very popular these days among the working class. These tours are designed as per the choice of tourists. The tourist is free to choose and plan how they want to travel and enjoy their holidays. These types of tours are meant for that kind of people who like to decide how, when, and where to travel.

This tourist may an individual, family, group holidays for families and group travel for business. These tours are promoted and developed by the ORBIT.

Components Of Tour Package

What is to be included in a package tour largely depends and varies from one tour organization to another, or from the one country to another, or from one destination to another and from one market to another market. But there are certain well-defined travel services which always turn a part of a package tour irrespective of the tour operator/travel agency, destination and even the market condition.

If we study and see the package tours offered by Thomas Cook and Sons Ltd., Cox and King Ltd., and other international travel companies, we find that a package tour has two major components. Therefore, a standard package tour has two basic components namely:

• Ground Arrangements

Travel industry experience has shown that the first component, i.e. ‘Travel’ is directly bought by the agency from the principal providers like airlines and transport operators and for ground arrangement, the travel agency management asks the ground operators.

The reason behind buying ground arrangement from a handling agency is that it represents as a ground operator at a particular destination for the numerous tour organizations. Secondly, the price offered by it are much lower than an individual agency obtain. Thirdly, it is very difficult to get credit from the supplier and finally, it ensures professional travel services.

Factor Affecting the Tour Package Formulation

Generally, the business of package tours involves great risk, high breakeven, high-quality product, and competitive prices. Therefore, the tour management requires in-depth tour planning and market survey. However, before a tour is designed the tour manager should take into consideration certain factors which are crucial in the formulation process.

These factors have a profound impact on the tourist’s satisfaction. The main factors are:

• Purpose of Tour
• Choice of Destinations
• Tourist Budget
• Legal Requirement
• Types of Tourist Accommodation
• Tour Period
• Departure and stay information
• Tour price; inflationary condition
• Tour Reference Tools
• Tour Features – political stability
• The relationship between the host and tourist generating nation

Tour Package Design and Selection Process

The quality of a package tour is entirely based on the above factors. Essentially, to design/formulate a travel product, the tour manager has to take the biggest responsibility, intuitiveness, imagination, and innovation coupled with a lot of business activities which range from finding new exotic destinations and planning, organizing or promoting such tour.

The following are the main stages in the tour design and selection process:

1. Initial Research

(i) the destination research.

The decision to develop and formulate a new package is a multi-stage process that involves various positive and negative points/steps. Normally, the idea for a new product comes either from the tour executive within the company due to a review of the questionnaire completed by the previous tour members because of the political, economic and social development in a particular area.

When a tour manager see that a large number of old clients are interested in taking a trip to particular destinations, naturally, those destinations become the nucleus of a new ‘tour concept’.

(ii) Market Research

Since tour package is a complete tourism product, obviously, before formulating/designing this product, market research needs to be analyzed and assessed in a systematic manner. Market  research provides us the answer to the following questions:

• What is the size of the tourism market?
• Who are the existing clients?
• Where do they live?
• Who will be their potential buyers?
• Who are their competitors – their strategy and area of business leisure?
• How many tourist ones want to cater?
• What price will the clients accept?
• What facilities are available and required?
• What are the constraints viz., license, permission, finance, restrictions, taxes, and others?

Once we know the basic components of the package tour, distribution channels, market conditions, constraints in the tourism market, we can develop the marketing strategy. It enables the smooth functioning of the agency and also offers a clear picture of the tour programme. Practically, market research is conducted by the private tour companies/ private tourism enterprises in order to penetrate the market.

2. Itinerary Preparation

By itinerary one means the designing of a programme which one wants to sell and it includes destinations, stopping points, number of days and the travel services that are to be included in the programme. Whether it is a lean season or an offseason, escorted or not escorted, consumer-oriented or readymade tour programme, the itinerary is prepared to identify the origin, destinations, stopping points, accommodations, sightseeing and other travel services on travelers’ trip.

3. Handling Agency or Destination Company

The appointment of handling agency not only ensure excellent travel services to the tourist but also make the operation smooth and profitable. It is a matter of great significance as the success of travel business largely depends upon the clients are actually taken care of during the tour.

It is a positive match between the promised services and tourist’s actual experiences or feelings. Thus, the tour operator should consider the experience of the handling travel agency in the business, the area of operation, reputation, credibility, professional staff, credit facilities and the competitive price in appointing a handling agency.

4. Negotiation

It is another important management decision area in tour designing and planning. Once the decision has been made regarding the destination’s concerning their date, duration and number of clients to be carried during the trip, the tour management starts negotiations with the principals’ suppliers for a normal contract.

Negotiation means talk between the travel companies and the principal suppliers for the terms, conditions, and prices of the components of a tour package. When both parties are satisfied, it leads to a formal or informal contract between them. The tour company negotiates with the following tour vendors/suppliers:

• Accommodation
• Transport Operations- Rail and Road
• Ground Operators
• Cruise Companies
• Car Rental Companies
• The overseas representatives
• Ancillary Service Organizations

5. Coasting and Pricing a Package Tour

The cost of a package tour encompasses the air ticket, the hotel room, car rental, entertainment charges, administrative costs, promotional costs, and other travel services. The confidential tariff helps the travel company in preparing the cost sheet which will enable the concern to determine its price strategy.

Tour pricing is a big factor in the success of the company’s tour programme. The price of a package tour is, whether it is an escorted, independent or hosted the tour, often lower than the combined costs of the same components purchased separately from the principals. However, the purchase price of a travel product is based on three factors: Cost, competition, and demand.

Every tour package sold by a vendor has a quantifiable cost. To produce profit the price paid by the tourists must be greater than the agency’s cost.

6. Tour Brochure

The tour package is an intangible product which has to be purchased by the tourists/clients without inspection and sometimes even without adequate knowledge. In these circumstances, the brochure becomes the principal instrument to perform the major tasks to inform the clients about the products and to pursue them to purchase it.

Designing, printing, and distributions of tour brochures require necessary skills and knowledge about the components of the tour package. Basically, in the era of specialization and intense competition, tour brochure creates awareness and provides the description of the holiday programme.

Thus, tour management should consider various pros and cons while preparing a tour brochure. A brochure should contain the following information:

• Name of the Travel Company
• Means of transport
• Details about destinations
• Accommodation, types, location, meals
• Name of the overseas representative
• Duration of each tour
• Booking, reservation and cancellation conditions
• Details of other services – insurance, currency, entertainmentTravel documents required
• Details of price

7. Development of Reservation System

The next step in tour formulation process is reservation system. The agency management in order to put a package into operation must develop and implement a scientific reservation system. The system depends on whether the reservation is to be handled manually or with a computer working on the distribution method.

Whatever method the agency may adopt, the agency management should always keep in mind the sole objective of the reservation system.

8. Marketing of Tour Package

Once a tour package is ready, travel agency management has to make a careful decision regarding promotion and marketing of the particular package tour. The basic objective of management is to make a tour package widely known to make it more and more attractive.

To achieve these objectives, the management must consider the budget available, promotion mix, potential market, easiest and most effective media, campaigning through the international, regional or the public/private sector etc.

The promotion of a package tour means increasing its sales potential and creating an awareness of the existing and potential markets. The following methods are commonly used to promote package tours:

• Middlemen – Retail Travel Agents, GSA, consolidators
• Familiarization tours
• Building Brand Loyalty
• Encouraging Potential Buyers
• Competitive Market

9. Tour Handling/Actual Tour Operation

After the successful marketing and achieving target sales, the next and final step in the process of tour designing is tour handling. It means an actual operation of tours, which generally includes administrative work and passenger handling like maintaining reservations, handling deposits, sending advice to ground operators, arranging travel representation, analyzing the feedback received from clients/escorts/ground operator and so on.

All this is not an easy task. At every stage, one has to face different types of queries and problems due to lack of coordination and communication.

Significances of Tour Package

Tour package is beneficial to travel companies, travelers, destinations and other organizations which are directly or indirectly involved in the tourism business. The main benefits are:

• Increase the seasonality of a destination cost/price
• Earn foreign currency
• Better quality of products professional services
• Wide-variety of the tour package
• Provide bulk business to organizers

How do Tour Operators Work?

To unlock the tourism industry's business and leisure travel potential, you must understand how tour operators work.

From package holidays to bespoke tours, tour operators make memorable holidays. Whether you're a domestic operator focusing on your country's destinations or an outbound operator designing trips abroad, this guide is for you.

The Role of Tour and Activity Providers

At the heart of the travel industry, tour operators like you, whether inbound or outbound, design travel packages that simplify things for tourists. This involves meticulous planning of land arrangements, accommodation, tours, and transport.

As a tour company, you may specialize in specific types of trips, such as leisure travel or business trips, creating packages that cater to your target market's preferences.

What are the different types of tour operators?

• Domestic Tour Operators : Focusing on the domestic tourism market, these operators provide travel packages within their home country.
• Outbound Tour Operators : These companies design holiday packages for travelers visiting other countries, often incorporating international destinations into their itineraries.
• Inbound Tour Operators : Inbound operators cater to tourists coming into their host country, providing local insights and experiences.
• Ground Tour Operators : Often known as ground operators, these firms handle local arrangements in the destination country, often working in collaboration with other tour operators.

How do tour operators work with accommodation and transport providers?

Tour operators play a pivotal role in crafting the perfect travel experience, and a big part of this involves working closely with accommodation and transport providers. Here's a glimpse at how this collaboration typically works:

Building Relationships with Accommodation Providers

• Negotiating Rates : Tour operators negotiate contracts with hotels and resorts to secure competitive rates. This often involves bulk booking or agreeing on fixed rates for a certain period.
• Customizing Guest Experiences : They work with these providers to tailor lodging experiences that align with the overall theme of the tour, whether it's luxury, adventure, or cultural immersion.
• Ensuring Quality and Standards : Regular inspections and feedback mechanisms are put in place to ensure that the accommodation meets the expectations and standards required for their clients.

Partnering with Transport Providers

• Seamless Logistics : Tour operators coordinate with various transport providers, including airlines, bus companies, and car rental services, to manage the logistics of getting travelers from one point to another.
• Group Deals and Scheduling : They often negotiate deals for group travel and ensure that transportation schedules align seamlessly with the overall tour itinerary.
• Quality and Safety Checks : Ensuring travelers' comfort and safety is paramount, so tour operators regularly check the quality of vehicles and the reliability of transport services.

Creating Cohesive Travel Packages

By integrating accommodation and transport seamlessly, tour operators create cohesive and hassle-free travel packages. This integration is crucial in providing a smooth and enjoyable experience for travelers, where every aspect of their journey is well-coordinated and managed.

Adapting to Client Needs

Tour operators remain flexible and responsive to their clients' needs, often customizing aspects of accommodation and transport to cater to specific preferences or requirements.

To summarize, negotiating strategically, ensuring quality, and meticulous planning are crucial to the relationship between tour operators, accommodation providers, and transport providers. In order to deliver great travel experiences that aren't just fun, they must be safe, comfortable, and just right to match discerning travelers' expectations.  

How do tour operators work with travel agents and OTAs?

Tour operators team up with travel agents and OTAs? It's like having the best of both worlds in the travel industry.

Here's the lowdown: travel agents are like sales gurus. They've got the skills to match your cool tour packages with travelers looking for their next adventure. It's all about personal touches and making travelers feel special.

Now, let's talk about OTAs – think big names like Expedia and Booking.com . These guys are your ticket to the global stage. They're not just about showing off your tours; they're about connecting you with travelers from all over, 24/7. Plus, with their smart marketing tools and the power of customer reviews (which, let's face it, are gold in our world), you're setting yourself up for some serious visibility and street cred.

Combining travel agents' personal selling charm with OTAs' global reach is how tour packages stand out in this competitive market.  

Talking about creating packages, how can you work with accommodation and transportation providers?

How to create inclusive tour packages?

As a tour provider, crafting appealing and inclusive tour packages, also known as package holidays or package tours, is key to attracting travelers.

These packages bundle services like flights, accommodations, and transportation for a hassle-free experience. Here’s how you can create comprehensive offers:

• Understand Your Travelers : Know who you’re designing for. Are they families, solo travelers, or adventure seekers? Tailoring your packages to fit their preferences is crucial.
• Forge Strong Relationships with Suppliers : Collaborate closely with accommodation and transportation providers. Strong partnerships can lead to better rates and unique offerings, making your packages more attractive.
• Quality Over Quantity : When choosing hotels and transportation options, prioritize quality. A well-selected hotel or comfortable transport experience can elevate your entire package.
• Flexibility is Key : Offer flexibility in your packages. Options for room upgrades, transport preferences, or even alternative activities can make your package more appealing to a diverse range of travelers.
• Highlight Unique Experiences : Include special experiences travelers can’t find elsewhere. Unique local tours or exclusive access to attractions can make your package stand out.
• Transparent Pricing : Ensure transparency in pricing. Hidden costs discourage travelers. Clear, upfront pricing builds trust and satisfaction.
• Feedback Loop : Regularly gather feedback from your customers and adjust your packages accordingly. Continuous improvement based on customer insights can significantly enhance your offerings.

By focusing on these areas, you can create inclusive tour packages that meet but exceed the expectations of your travelers, ensuring memorable and hassle-free trips.

How do tour operators pay suppliers?

For tour operators, establishing and maintaining a solid financial relationship with suppliers — including accommodation and transportation providers — is crucial for a smooth and successful business and tour operation itself. Here's a look at how these payments are typically managed:

Advance Payments and Deposits

Tour operators often make advance payments or deposits to secure services well ahead of tour dates. This is especially common with hotels and special activities that require early booking.

Credit Facilities and Post-Payment Agreements

In some cases, tour operators may have credit arrangements with suppliers, allowing them to pay after the service is delivered. This requires a high level of trust and a proven track record of reliable payments.

Bulk Payment Contracts

For regular or frequent services, operators might negotiate bulk payment contracts. Under these agreements, they pay a lump sum for a specified number of services or bookings over a period, often at a discounted rate.

Net Rate Agreements

Suppliers may offer net rates to tour operators, which are discounted prices exclusive of commissions. The domestic tour operators then mark up these rates when selling to customers, and the difference forms their profit margin.

Direct Billing for Services

In some collaborations, suppliers might directly bill the tour operator for services rendered, usually after completion.

Electronic Payments and Wire Transfers

With the digitalization of financial transactions, most payments are now made electronically. This ensures quick, secure, and traceable transactions.

Managing Currencies and Exchange Rates

For international tours, operators must adeptly manage payments in different currencies, considering exchange rates and transaction fees.

Contingency Funds for Unforeseen Expenses

Operators often set aside contingency funds to cover unexpected costs or last-minute bookings, ensuring that the tour runs smoothly without financial hiccups.

Why is the booking process so important for selling tours?

The booking process is crucial in the tour industry for several key reasons:

• First Impression Matters : This initial interaction sets the tone for customer experience and expectations.
• Ease Equals Sales : A simple, user-friendly booking system encourages more purchases.
• Trust Building : A smooth process builds trust, showing customers that they’re dealing with a professional operator.
• Upselling Opportunities : During the booking, there’s a chance to offer additional services or upgrades, enhancing the experience and increasing revenue.
• Data for Personalization : The information collected can be used to tailor future offerings and improve service.
• Effective Communication : This stage is vital for conveying key tour information and ensuring customer understanding.
• Reputation Impact : A positive experience can lead to recommendations and positive reviews, while a negative one can harm the operator's reputation.
• Resource Management : Understanding booking trends helps manage tours and resources.

In short, the booking process isn't just about securing sales; it's about shaping the entire customer journey, from first impressions to post-tour feedback.

Tips for Operators

Invest in a good, easy-to-use, and cost-effective booking software solution. Granted, it may incur some fees on your part, but think of the heavy lifting it does for you.

It does more than take reservations and bookings. It saves you tons of time with manual tracking, guest follow-up, and ticket management. It also eases the customer journey from point one to post-tour feedback.

Booking software solutions like TicketingHub save you stress and ease your guests. It charges 3% only for successful bookings.

Trusted by Egypt Sound and Light Shows, The Immersive Gamebox, Secret Food Tours, Sipsmith Distillery , and a hundred folds more - this software solution is jam-packed with time-saving features in an easy-interfaced navigation.

Whatever software solution you pick, aim for the solution that saves you time from needless complexities in design and usability - all while helping you stay profitable and leaving your guests satisfied right from the booking page.

Conclusion: Making Great Tours Happen

In wrapping up, it's clear that being a tour operator is about connecting the dots to create amazing travel experiences. Whether you're showing off the best spots in your own country or taking people on adventures abroad, the key is in the details – from picking great hotels to organizing smooth rides.

Your partnerships with local travel agencies, agents and OTAs are super important too. They help you reach more people and make sure your tours stand out. And when making tour packages, remember to listen to what travelers want and keep things flexible and interesting.

Don't forget, managing your money well, especially when paying for services, keeps everything running smoothly. And the booking process? That's your chance to make a great first impression and keep things hassle-free for your customers.

So, there you have it – mix in a bit of planning, a dash of good relationships, and a sprinkle of creativity, and you're on your way to creating trips that travelers will love. Happy touring!

FAQ Section

How important are tour operators.

Tour operators play a pivotal role in the tourism industry. They create and organize tour packages, catering to both business and leisure travelers. These packages simplify travel arrangements, offering hassle-free travel.

Tour operators are the key architects of memorable trips, ensuring travelers can explore various destinations easily.

What is the life of a tour operator?

Tour operators plan meticulously and collaborate with various stakeholders. They work closely with outbound and inbound tour operators, accommodation and transport providers, and even travel agents and online travel agencies (OTAs).

Their goal is to create appealing package holidays, manage travel arrangements, and provide tourism products that meet their target market's preferences.

What are the strengths of tour operators?

Tour operators have several strengths, including the ability to create inclusive tour packages that simplify travel for tourists. They can specialize in various categories, such as business or leisure travel. They can also collaborate with distribution partners like travel agents and OTAs to reach a wider audience.

Tour operators leverage market data to sell directly to their target market, offering tourism products that cater to different preferences.

What's the difference between a tour operator and a travel agent?

Tour operators and travel agents serve different roles in the travel industry. Tour operators design and create tour packages, manage travel logistics, and provide tourism products.

Travel agents, on the other hand, act as intermediaries between travelers and tour operators or suppliers. They assist customers in choosing and booking the right travel options, including tours created by tour operators, but they don't create the tours themselves.

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Different Types Of Tour Operators That You Should Know About

Tour operators are an integral part of the travel industry. They play a crucial role in creating and selling travel packages to different destinations worldwide. A tour operator is a company that puts together travel packages, which usually include transportation, accommodation, and activities, and sells them to consumers. This blog will discuss the different types of tour operators and their roles in the travel industry. Knowing the types will help one to choose the better fit. 

Types of tour operators

As per the requirement, there are different types of tour operators in the travel industry. Some of these include inbound tour operators, outbound tour operators, domestic, specialist among others. Let us explore them one by one. 

1. Inbound Tour Operators

Inbound tour operators organize and sell travel packages for visitors coming into the country. They are responsible for creating itineraries and ensuring that visitors have a memorable experience during their stay. They typically work with local suppliers, such as hotels, transportation companies, and tour guides, to assemble their packages.

2. Outbound Tour Operators

Outbound tour operators are companies that organize and sell travel packages for consumers who are traveling out of their home country. They are responsible for creating itineraries and ensuring that travelers have everything they need for their trip. They work with local suppliers in the destination country to ensure everything is in place when their clients arrive.

3. Domestic Tour Operators

Domestic tour operators organize and sell travel packages within their home country. They specialize in creating tours that showcase the best that their country has to offer. They work with local suppliers, such as hotels, transportation companies, and attractions, to create their packages.

4. Specialist Tour Operators

Specialist tour operators focus on specific niches within the travel industry. They may specialize in adventure, education, luxury, or any other type of travel that appeals to a particular group of travelers. They typically have a deep knowledge of their niche and can create unique and memorable client experiences.

5. Travel Agency and Tour Operators

Travel agencies and tour operators are often used interchangeably, but there is a noticeable difference between the two. Travel agencies typically sell flights, hotels, and transportation, while tour operators create and sell complete travel packages that include activities and accommodation.

6. Luxury Tour Operators

Luxury tour operators create and sell high-end travel packages to discerning travelers. They typically offer personalized service, exclusive access to attractions and activities, and top-of-the-line accommodations. Luxury tour operators cater to travelers who are looking for a one-of-a-kind experience.

7. International Tour Operators

International tour operators are companies that create and sell travel packages to destinations around the world. They work with local suppliers in each destination to develop itineraries that showcase the best of what the goal has to offer.

8. Coach Tour Operators

Coach tour operators are companies that organize and sell tours that are conducted on a coach or bus. These tours typically cover a large area or several countries. They offer a convenient and affordable way to see multiple destinations in one trip.

9. Receptive Tour Operators

Receptive tour operators work with other tour operators to create travel packages for a specific destination. They are responsible for coordinating the local suppliers and ensuring that everything runs smoothly during the trip.

10. Adventure Tour Operators

Adventure tour operators specialize in creating and selling travel packages that offer outdoor activities and adventures. These tours may include hiking, rafting, or wildlife safaris and are designed for travelers looking for an adrenaline rush.

11. Educational Tour Operators

Educational tour operators create and sell travel packages that focus on educational experiences. These tours may include visits to historical sites, museums, or cultural events and are designed to give travelers a deeper understanding of the destination.

Why tour operators are crucial?

Tour operators play a vital role in the travel industry as they create and sell travel packages that offer unique and memorable experiences for travelers. By understanding the different types of tour operators, travelers can choose the right tour operator for their specific needs and preferences.

It’s also worth noting that many travel agencies also offer tour operator services, so it’s important to do your research and choose a reputable company with experience in the destinations and types of travel that interest you.

Whether planning a domestic trip or an international adventure, working with a tour operator can save time and hassle while providing unique and memorable travel experiences. In addition, many tour operators are now offering more sustainable travel options, such as eco-tourism and responsible travel. These tours aim to minimize the impact of tourism on the environment and local communities while providing travelers with unique and authentic travel experiences.

Another trend in the tour operator industry is using technology to enhance the travel experience. For example, some tour operators now use virtual reality to provide travelers with a preview of their destination or to offer immersive experiences during the trip. Tour operators will likely continue to adapt and innovate as the travel industry continues to evolve to meet travelers’ changing needs and preferences.

Suggested Read:  How to Become a Travel Agent

In summary, tour operators play a vital role in the travel industry, offering travelers a wide range of options and experiences. By understanding the different types of tour operators and their functions, travelers can make more informed choices when planning their trips. With the increasing focus on sustainability, responsible travel, and technological innovation, the tour operator industry is poised to continue growing and evolving in the years to come.

Frequently Asked Questions

1. what are the criteria for classifying tour operators.

Tour operators are classified based on the type of tour, their business, and their region of operation for package tours. This aids in comprehending the distinction between the meaning and function of each category. Inbound, outgoing, domestic, and ground operators are therefore included in the categorization.

2. Who do tour operators collaborate with?

Coordinating with bus companies, airlines, motels, and resort representatives. Service standards, contracts, and fees must be agreed upon. Customer names are confirmed with airlines/hotels.

3. What industry does a tour operator work in?

A tour operator is a hospitality expert that organizes tours and assists guests throughout their visits to ensure that they have a great experience. These experts advise consumers on various travel packages based on their budget and interests.

4. What is the role of an inbound tour operator?

An inbound tour operator specializes in organizing and selling travel packages for visitors coming into a specific country. They work on creating itineraries and ensuring a memorable experience for travelers by collaborating with local suppliers, including hotels, transportation companies, and tour guides.

5. What sets luxury tour operators apart?

Luxury tour operators create and sell high-end travel packages that cater to discerning travelers. These packages often include personalized services, exclusive access to attractions and activities, and top-of-the-line accommodations. Luxury tour operators focus on providing a unique and indulgent travel experience for their clients.

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What is a Tour Operator: A Travel Definition

What is a tour operator.

When looking to work in the travel industry the big decision is between whether you want to be a tour operator or a travel agent. So, what is a tour operator?

Definition of a Tour Operator

A tour operator controls, books and devises the whole trip. They create a package holiday by combining all elements such as hotel, airport transfers, activities, restaurants, tours and such like. A tour may not include all of these elements, the list is purely an example.

The Difference between a tour operator and a travel agent is that a tour operator makes the package and can sell direct to consumer. A travel agent sells the packages created to the consumer.

In essence, the different roles do what they say on the label-

A tour operator – operates the tour

A travel agent – is purely an agent for holidays selling tours that are provided.

Creating a Package Holiday

Tour operators create a package holiday. The Definition of a Package Holiday means the arranged combination of at least two of the following components:

• Accommodation
• Other tourist services that account for a significant proportion of the package.

The most common package holidays that the consumer sees are accommodation and flights, accommodation and airport transfer or entire bespoke tours. A tour operator does not always sell flights, they can also be purely ground-based.

Cycling holidays, yoga retreats, wellness holidays, detox retreats, skiing holidays, hiking breaks, theatre breaks, cookery escapes are all examples. This list is far from exhaustive.

All package holidays are subject to Package Travel Regulations .

Niche Tour Operators

The reason tour operating began was to offer packages to untouched parts of the world. The layman didn’t have access to make arrangements in less well-known areas of the world. In today’s world we have the internet and so the world has become very small and incredibly accessible. However, there is a bigger demand for niche tour operators today than ever before.

The travel industry is one of the fastest-growing industries in the world and travel is now seen as a necessity in people’s lives, especially millennials. Niche tour operators offer some fabulously unusual trips such as seeing orangutans in Borneo to driving holidays in Albania to photography tours in the North Pole – every corner of the world can be discovered. It is an incredibly exciting time for the travel industry. The question may not simply be what a tour operator is, but what they can offer.

Starting As A Tour Operator

If you are looking to start as a tour op. there are a plethora of options to enable you to develop and expand your business – more so than ever before. The fundamental point of running your business successfully is to appreciate that consumer protection is the key in travel.

If you’d like to discuss this further, please get in contact with one of Protected Trust Services’ (PTS) lovely staff members by calling 0207 190 9988 . Or, you can visit our member support and travel trust account pages to learn more about how we protect you.

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package tour

Definition of package tour

Examples of package tour in a sentence.

These examples are programmatically compiled from various online sources to illustrate current usage of the word 'package tour.' Any opinions expressed in the examples do not represent those of Merriam-Webster or its editors. Send us feedback about these examples.

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“Package tour.” Merriam-Webster.com Dictionary , Merriam-Webster, https://www.merriam-webster.com/dictionary/package%20tour. Accessed 4 May. 2024.

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The differences between outbound and inbound tour operator agents

By Blake Ng — 25 Mar 2018

distribution   inbound tour operator   inbound travel   outbound tour operator   outbound travel

Updated January 2023 – Are you a tour operator trying to find which option is best for you? Or alternatively, are you a tourism professional trying to set up your distribution system? Trying to make your mark and stand out in a highly competitive industry? Let’s start at the beginning to help you understand the types of travel agents available to partner with. 

The role of a tour operator is to brainstorm ideas and conduct research to design holiday packages for travelers. In essence, they curate and compile various travel elements into a package that people will find appealing — creating a tailored and individual experience based on the interests and needs of various travelers. Holiday packages usually combine accommodation, cuisine, sightseeing, and transport. 

Inbound vs. outbound travel

An inbound tourist is someone who visits a country but is not a resident of it. In outbound tourism, residents of a country visit another country. Does this sound like two sides of the same coin? That’s because it is.

Let’s look at an example:

Kevin, an Australian citizen, is traveling to Argentina for a holiday.

Kevin is an inbound tourist to Argentina. In contrast, Kevin is an outbound tourist from Australia. 

Depending on where Kevin chooses to organize his holiday packages will depend on if he makes use of inbound tourism or outbound tourism.

An inbound tour operator will sell to people soon to be arriving in their countries, whereas an outbound tour operator will sell to people before they arrive at their destination.

Inbound tour operator agents

An inbound tour operator, also known as a destination management company, is a locally-based business or individual that provides holiday planning. This includes itinerary planning and arrangement of payment for their overseas clients. 

Inbound tour operators deal with both individuals and groups of international travelers. They make arrangements that are specifically catered to international guests, ensuring their clients have a comfortable and enjoyable stay. 

An inbound operator can work with the convenience of being able to operate at the same location in which they are organizing the holiday packages. Compared to outbound tour operators, an inbound operator would better understand the local area and its culture. This is especially true when receiving any inquiries or questions about tour information from a potential client. Additionally, an inbound tour operator is usually encouraged to develop strategic partnerships with other local companies and tour and activity operators . Building these relationships is a lot easier due to geographical location. 

Inbound tour operators are locally based

The purpose of inbound tour operators is to promote the entire destination to potential visitors from their local viewpoint. The operational advantage of being locally based is having easy access to work with other companies to promote the location as a whole to interested overseas travelers. Additionally, inbound tour operators can offer a more personalized service to their customers by having direct contact with them in their chosen destinations.

Inbound tour operators often work with other travel agents and distribution partners

Tour packages are often created and promoted by inbound tour operators in partnership with other travel agent s and travel distribution channels . Inbound tour operators work under the assumption that travelers are often motivated by package deals and promotions, and take advantage of this when marketing their destination. This means it’s beneficial for inbound tour operators to create packages that include local tourism businesses such as hotels, transportation, and tours and activities. Following that, these same packages are promoted to segments of the target market that are most likely to visit the region in the near future.

Choose an inbound tour operator if:

Working with an inbound tour operator is a good idea if you want to increase your visibility in a chosen destination. This will be increasingly beneficial if your target market shows interest in package deals. 

Outbound tour operator agents

A typical outbound tour operator works with international tourists. In contrast to inbound tour operators, outbound tour operators take travelers overseas from their home country. They offer a variety of tour packages that enable tourists across borders to travel abroad easily.

Outbound tour operators contribute significantly to the destination country’s economic growth. The majority of outbound tour operators choose to focus on a specific destination. This may be a destination that is currently popular or a destination in which they have special expertise and distribution partners. 

Most outbound tour operators cater to international travelers. 

Outbound tour operators offer travelers the convenience of visiting another country of their choice through tour packages. When travelers book a tour with an outbound tour operator, they can get everything they need under one roof — simplifying the travel experience. 

A particular region of the world is often their specialty

Outbound tour operators have the benefit of being experts in the destinations they serve. European destinations are a very popular choice with outbound tour operators; however other destinations, such as Southeast Asia and the Middle East, are growing in popularity. A successful outbound tour operator will often be very tuned-in to trends, one step ahead of the crowds, so they know which destinations to specialize in next. 

Choose an outbound tour operator if:

If your business strategy includes targeting international travelers, partnering with an outbound tour operator is likely to be a good fit. Additionally, an outbound tour operator will be a good fit if you understand overseas offerings and have the ability to promote them to domestic customers.

Advantages and Disadvantages

Just like running any form of travel company, there will always be some advantages and disadvantages. before working with either an inbound or outbound tour operator, here are a few pros and cons you should consider.

Inbound tour operators

As an inbound tour operator, you’ll have the advantage of convenience. This is due to being able to operate in the same location or home country as the tours you offer. This is extremely beneficial when receiving any inquiries or questions about the tours as you’d have a greater understanding of the local area and its culture compared to outbound tour operators. Furthermore, as an inbound tour operator, developing strategic partnerships and forming great relationships with other local companies and tour and activity operators will be a lot easier and is usually encouraged.

Another major advantage an inbound tour operator has is that most of the interactions with their customers will be direct. Meaning, it will allow them to offer a more personalized experience based on their customer’s needs.

Outbound tour operators

Just like the inbound operators, outbound tour operators deal with customers from their own countries. This makes designing and creating tour packages a whole lot simpler as they can customize the tours based on the customer’s interests. However, a disadvantage outbound tour operators have is not being based on the travel destination itself. This could create problems and can be more difficult to resolve any issues that may arise.

Fortunately, outbound tour operators have the flexibility to update their products and packages based on the latest travel trends and demands. As we all know, the travel industry is highly competitive and constantly evolving. Offering outbound tours gives you the freedom to adapt to changes in the travel and tourism market swiftly.

Which one should you choose?

The key difference between inbound and outbound tour operators comes down to whether they provide tours in their home country or abroad. You should consider both types of tour operator agents when developing your distribution strategy. Partnering with these two agents will maximize your reach to both international and domestic travelers.

Now, it’s time to think about ways to make your distribution and marketing channels more effective. You can identify your key partners via your research or by connecting with a tour wholesaler . By establishing partnerships with a large tour operator network , you can advance your business — both inbound and outbound. Read our previous blog if you are looking for tips and tricks for partnering with travel agencies or download our online distribution  ebook today.

In general, both types of tour operator agents play an important role in the overall success of your distribution strategy. By partnering with both of these agents, you’ll be able to maximize your reach to both international and domestic travelers.

When bookings start to come through, you’d want to ensure that you’re providing your customers with a simple booking journey. By utilizing an online booking software , you’re not only simplifying the customer’s booking journey, you’re streamlining your processes as well. This is due to advanced features that automate your processes that allow your customers to make a booking on the spot. These features include a real-time availability viewer, that allows your customers to book based on your exact availabilities. Payment gateway integrations that provide your customers with the convenience of secure online payments. And Automatic communication, which sends your customers confirmation and updates regarding their bookings.

To top this all off, you can easily manage your partnership with both outbound and inbound tour operators via an online tour operator marketplace like Rezdy Channel Manager . Rezdy’s marketplace broadens your reach to over 25,000 active resellers in the industry.

Using Rezdy Channel Manager is as simple as:

• Naming your price
• Setting your rates
• Letting resellers sell and promote your products

On top of that, you don’t have to worry about collecting payments and paying commissions as Rezdy automatically organizes payments for both parties. This reduces the need to chase your agents for payments.

Ready to capture more inbound and outbound bookings with Rezdy? Start a FREE 21-day trial or book a free demo today.

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Tour Operators and Travel Agents

Tour Operators are persons or organisation which organised and sells travel like air, railway ticket, transport and accommodation to a tourist. Moreover, a travel agent is a form of business that sells travel related products and services, particularly package tour to the tourists on behalf of travel suppliers such as airline, hotels, tour operator, cruise liners and other travel vendors.

Several travel agencies are specialized in commercial and business travelers while some agencies have setup separate departments dedicated to a separate sector. Several travel agencies serve as general sales agent for larger and foreign travel agencies or companies. A travel agent plays a significant role which converts a countries attractions, accessibility, amenities into saleable goods commodities and promotes, markets, and convince to buyers. Thus, the place of a travel agent is very prominent among the other types of intermediary operations involved in the provisioning and selling of travel products and travel services.

Travel agent:  

Travel agents is defined as   an individual, a firm or company who makes arrangements on behalf of tourists in respect of travel tickets, travel documents-VISA, transportation, accommodation , entertainment, insurance, foreign currency and other travel services from the principal suppliers and sells to the prospective tourists. Thus, the definition clearly identifies that a travel agent/ travel agency is a business may be small or big that sells travel related products and services to end-user customers on behalf of third party travel suppliers/ vendors, such as airlines, hotels and cruise lines. Generally, the clients of travel agencies include tourists and business travellers.

Tour Operator :  

The term tour operator is used to define the large scale operation in the travel intermediary’s process. Thus, ‘tour operators’ can be wholesaler, and or retailer depending upon market size and organizational structure. Thomas Cook, Thomson, American Express, Cox & Kings, Kuoni, Thomas Bennett are good examples of a dual travel organization.  In the Indian tour operation market most tour operators are the outgrowth of successful retail travel agencies in their own travel markets. A Tour operator is defined as an organization/ firm/ company who package the travel to and from a destination along with complete ground services like accommodation , local sightseeing, local cultural fairs / festivals etc. Interestingly, they provide these services themselves as some of the ingredients of tour package they their own or they arrange these ingredients from different destination operators.       

 Generally, the industry practices indicates that a tour operator is a firm /company which specializes in the developing, planning and actual operation of pre-paid, pre-planned holidays and makes these available for tourists either directly or through the  middlemen. In most of the advertisements in the newspapers, magazines and others we have seen regarding five days/four nights along with tour itinerary and price per PAX.   For example, one week in Kerala  5000 Rs. (500 Rs. worth healthcare coupons free or ten days in Goa—heavy off season discounts, beaches, music and other services for Rs. 40000 inclusive meals per PAX etc.  There are numerous offers like this in the newspapers and magazines. Generally, these offers of package tours are available for both individuals as well as groups.  Now the question is that we have ever paid any attention to these offers that who have packages such tours and why? Or how they are packaged   and marketed these products/ services to general public?  Some people arrange these products/ services by their own and some approach the professional organizers to arrangement on their behalf.  When we arrange travel services/ product by own definitely this is a time consuming process. On the other hand there are many people who don’t want to bother themselves about arranging, planning and organizing their own journeys rather they want this to done by someone professional expertise.  It is the tour operator who packages all attractions of a destination into one composite product and retails it through the travel agents or directly to the tourists. He creates the demand, travel, market and image of the destination. Today, many tourists buy these package tours as per their interests, priorities and budget at a price that is pre-determined. The complete holiday package tour includes travels (air/surface), accommodation , sightseeing, insurance, currency, escort/ guide and so on. The person who puts together all these aspects into a package is known as the Tour Operator.

 Practically, a tour operator is a firm/ company who provides travel information, plans, organises and coordinates travel related services/ products with various ground operators to create a tour package. At the same time tour operator also ensures smooth conduct and operation of the package tour due to this professional work a tour operator is also called a Tour/Travel consultant or Tour Coordinator. The tour Operator may or may not necessarily have any product of his own but act as an intermediary for different travel vendors to tailor a package to meet the varied needs of a traveller. In fact, a tour operator plays a pivotal role in organizing, explorations, research expeditions, planning and operation a tour package. We must appreciate here that tour operations originated ever since people wanted to explore new areas/ destinations, go on pilgrimage / religious or trade expeditions, individually or in groups. 

 Definition of a travel agent and Tour operator 

•  The American Society of Travel Agents ( ASTA ) defines the travel agent as follows: “An agent is a person who undertakes a job for another person, who is the ‘principal’. The principal in such a relationship not only sets the goals of the job, such as selling tickets, but also may control the means and manner in which the job is done”.

•  According to Airlines Reporting Corporation (1987), “a retail travel agent is defined as a business that performs the basic functions : quoting fares and rates, makes reservations, arranges travel tickets, books rooms, arranges travel documents, and acts on the behalf of tourism vendors.”

•  Joel M. Abels, (1985) “A travel agent is an individual who, based on recognized industry standards of expertise and experience, is deemed qualified by travel agent peers and by travel principals to offer and sell travel arrangements and services to the general public”.

• Aryear Gregory (1985), “The tour operator is the architect/manufacturer who assembles the tour ingredients and creates travel, creates a market, creates lead and creates an annuity by having satisfied clients who return year after year”. 

•  James M. Poynter (1993) defines, “tour operator is one who has the responsibility of putting the tour ingredients together, marketing it, making reservations, handling all financial and accounting aspects, and selecting as well as managing tour managers”.

•   Mohinder Chand (2006). “ a tour operator is an organization which conceives idea of tourism product and converts this idea into realities by repeating tourists again and again”.

Difference between Travel Agent and Tour Operator

     Historically, the tour operator has mostly emerged from retail travel agency. However, today a clear distinction must be made between a travel agency and a tour operator.

Essentially a travel agent is a retailer and tour operator is a wholesaler. The travel agent is a retailer because he sells the travel services to the final consumers i.e. the tourists directly.

But unlike the travel agency, the tour operator is a manufacturer of the tourism product . He plans, organises, sells and conducts the tours. He acts as a wholesaler also sometimes because he has to engage travel agents as middleman to sell his package tours in different territories. The Figure 1.1 makes amply clear the flow of travel services from suppliers to the tourists. Moreover, the role of travel agent and tour operator in the tourism market is well defined. In fact, due to strategic alliances and world integration this distinction is meaningless as both are performing similar functions. 

The main difference as: 

•       Travel agents usually sell to end-users   on behalf of travel vendors.   

•       Tour operators plan almost each and everything related with tour package.  

•       Tour operators are specialized in dealing with specially one country/ one destination at a time. But there’s no specialization in the case of a travel agent.

•       Most of the cases some travel agents work directly with tour operators and provide the tour operators with the information of clients.

•       Travel agent gets permit to work from the respective tour operator either private or public while tour operator acquires license from the Ministry of Tourism.

•       Becoming a travel agent doesn’t require so much time/ money as compared to the tour operator.  

•       Tour operator is directly responsible to the regulatory authorities while travel agent is first responsible to the clients and then to the tour operator.

•       The main source of income of travel agent is commission and other reserves while a tour operator earned profit by providing services/ products to the clients and he also earned commission from the different travel vendors like hoteliers, transporters, airlines , cruise companies and destination companies etc.

IMPORTANCE AND FUTURE OF TRAVEL AGENT AND TOUR OPERATOR  

    Over the years, the role and contribution of travel agents and tour operators have been changed. In the beginning travel agent were ‘mom and pop’ organisations but today they are more professional and operating a large scale.  Inbound travel has been dramatically hit by introduction of VISA on Arrival and different promotional measures adopted by the Indian government like Incredible India   In fact; all forecasts are that travel between countries will continue to enjoy substantial growth through the 21st century. Thus, tourism between different countries has shown tremendous growth during 2016-2017 and India is no exception in this context.   Recent figures from the Ministry of  Tourism , Government of India have shown that whereas the overall number of domestic holidays increased by 20% between 2000 and 2016,   the domestic market will grow by 20% in the five years to 2017 and this  is  good news for the  tour operation industry. Outbound travel has, of course, enjoyed continuous growth since the advent of overseas package holidays in the 1990s. Whilst the outbound package market has in recent years increased at approximately 10 million holidays each year, independent holidays taken abroad are still growing strongly, and ensure that the overall outbound market continues to grow each year( Ministry of Tourism , GOI, 2016).  

     The following points are clearly described the role and contribution of travel agent and tour operation business in India:   

·  Travel Inf ormation:    

   Travel information is first and foremost activity of a tour operator. Today, most of the tour operators have developed an internet presence by posting a website, with detailed travel information. Moreover, use of technology has become vital for all travel companies. Most of the travel companies hired specially technology firms to maintain their website and upload latest travel information. Moreover, these companies use travel service distribution companies who operate Global Distribution Systems (GDS), such as  Sabre Holdings , Amadeus , Galileo  and World span to provide up to and minute detailed information on tens of thousands of flight, hotel,  transporters, car rental and others related with tourism services including package tours .

•  Tourist Publicity Material: 

    Tour operators produce huge tourism related material to attract and motive the tourists.     Moreover, travel agents and tour operators brought out a range of publicity material including shell folders on adventure, wildlife, tourist resources of South India Rajasthan and other states including tourist map and trekking maps of Himalayas. It also produced a general India brochure and those on various states and tourist destination in India. Thus, they are exploring India at global level. 

•  Promotion of Tourism:  

       Many tour operators and travel agents in collaboration with central or states governments have launched major campaign on “Tourism Environment / Awareness”. These campaigns are being released in all leading magazines across the country in Hindi, English and other Indian languages. The themes of the campaigns are “We can and we will keep India beautiful”. Besides, the department also launches advertising campaigns to promote lesser known bill resorts called “Holiday Campaign”; to promote Orissa and a campaign to promote Andaman and Nicobar and Lakshadweep Islands.

•  Tourism development   Planning :  

       Since tour operators play a pivotal role in tourism industry. They are actively involved and participate in tourism developmental processes and tourism policy formulation in the respective areas.  Every state in India has recognized that tourism has a vast potential for development in the country. Appreciating this potential Government has accorded the status of an industry to tourism.  Government has also extended various financial and non-financial incentives to tourism industry to motivate the tourism players.  Private sector investment has encouraged in developing tourism and public sector investment should be focused only on development of support infrastructure. Thus, travel agent and tour operators are  focusing on the following states so that tourism may developed  in a planned and systematic manners  such as states of Uttaranchal, Himachal Pradesh, Uttar Pradesh, Haryana, Meghalaya, Andhra Pradesh, Kerala, Arunachal Pradesh, Tamil Nadu, Bihar, Tripura, Manipur, Assam, Karnataka and Union Territories of Andaman arid Nicobar and Lakshadweep etc.

•  Promotion of Wildlife Tourism: 

      To  promote wildlife tourism, facilities are provided in the form of Forest Lodges and transport within the sanctuaries / national parks: Forest Lodges at Enjal (Gujarat), Manas (Assam), Dhangari (UP) and Parambikulam (Kerala) is in progress. The work of Forest Lodges Betla (Bihar) Simlipal (Orissa), Desert National Park, Ranthambhor, Ranakpur (Rajasthan). The tour operators are adding these destinations in their itineraries so that special interest tourism may be promoted. 

•  Tourist arrivals and Foreign exchange earnings: 

     As per Government reports,  the year 2016 has been a highly successful year so far as tourism in India is concerned. For the third successive year, India witnessed a positive growth in foreign tourist arrivals. Today, tour operator have been recognised as a vital component of travel and tourism industry and have become an integral part of this industry at global. They Account for more than 90% of international and 75% of domestic tourist traffic. Further, more than 70% of all travel agency revenues are derived from the business travel. Most travel agencies sell both commercial and leisure travel but there is many travel agencies which only specialize in one sector or the other. It is also appreciated that more than 50% tourists are coming through the travel agency and contributing huge foreign exchange to the country.

•  Development of New Products:   

      Various strategies have been formulated and implemented for tourism to meet the diverse needs of the tourists. Such as cultural  tourism,   wildlife tourism, sports tourism, social tourism, mountains and beach tourism, promotion of fairs and festivals,  and  leisure tourism and development of travel circuits.

•  Employment generation Promotional:   

       Travel agent and tour operators are the major players in the tourism industry. In fact, most of the tourism management students are employed in this vital sector of tourism industry.  More the 25 million people  are  working directly or indirectly in this sector. Event many tourism management students are establishing their own ventures. This is also helps the students to enter into their own business enterprises. 

•  Analysis of potential Tourism markets:   

     Most of the tour operators conduct market analysis and accordingly develop product. In fact, tour operators / travel agencies analysed tourism market potentials’ produce modified products based on the existing products and use technologies and skills. They identify potential of both domestic and foreign customer groups with description relevant characteristics like age, income, preferences and influencing factors on future demand. They also identify the unique selling point along with description of wanted characteristics product by the tourists.

      Thus, by 2020, the government of India expects travel and tourism to contribute Rs8, 500 billion to GDP, almost four times the value in 2010. With successive governments committed to reform, a strong manufacturing sector and a private sector that already has a critical mass that is needed to drive growth, it is unlikely that the strong growth in GDP is likely to be reversed ( Ministry of Tourism , GOI, 2017).  

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Which Type of Tour Operator are You?

Let’s be honest – the tour operator business is highly competitive as companies try to get a large share of the international and domestic markets they operate in. In order to better navigate the landscape, you need to understand where you stand in that market.

We all know that a tour operator is one who packages key components (or all) of a trip, markets it, sells it to a traveler or tourist, and handles the entire tour operation.

But do you know exactly which type of tour operator you are?

Having clarity on this question will help you identify key partners to work with (like DMOs or hotels) and make better business decisions overall. As a result, you’ll be able to curate better tour packages and run your entire tour operation smoothly, efficiently and successfully.

This is why we’ll cover the different types of tour operators below (plus – we’ve attached a handy infographic at the end for your reference).

So, let’s get to it – which type of tour operator are you?

Types of Tour Operators

There are five main categories of tour operators that you could fall into: inbound tour operators, outbound tour operators, domestic tour operators, receptive tour operators, and ground tour operators. Let’s find out which one of these five you fall into.

Of course any tour operator cannot be fully successful without a booking system that will automate all reservation processes and allow them to generate more revenues. If you still haven’t got a booking system, try Regiondo , the most popular booking system in Europe designed to streamline your booking process. Book a demo with Regiondo experts to learn how your business can leverage booking system.

Inbound Tour Operators (AKA Incoming Tour Operators)

Inbound tour operators bring tourists into a country as a group or via individual tour packages. They handle all arrangements in the host country; and the types of tours they curate are specifically for non-residents touring the country.

Let’s look at an example.

If a group of Italian tourists want to explore Germany, then the tour operator in Germany who handles all the arrangements for the tour is known as an inbound tour operator. So, inbound tour operators are locally based and offer tours that cover their own country.

Most inbound tour operators hire local travel agencies for things like airport pick-up and drop-off; form partnerships with local hotels and businesses; and have key partnerships with other types of tour operators (who help them run tours on the ground).

Outbound Tour Operators

Unlike inbound tour operators, outbound tour operators work within their countries to take travelers to other countries. They are tour operators who market their tours for international destinations, either for business or leisure travel.

Let’s say, for example, that a group of Canadian tourists are planning a trip to Italy. Then the tour company in Canada that handles all the ticket reservations and hotel bookings is the outbound tour operator.

To further simplify things, outbound tour operators design and package tours for tourists in their home country to visit an international destination.

Now, most outbound tour operators choose to specialize in specific destinations: either a destination that is “trending” or one in which they have particular expertise and distribution partners. They often work with other tour and activity providers in the destination when designing their travel packages.

Domestic Tour Operators

Domestic tour operators are those that put together inclusive tour packages and sell them to domestic travelers. In other words, they are tour operators who provide travel packages and tours within a tourist’s native country.

Domestic tours usually involve residents of a specific country traveling within that country. They can visit national parks, scenic areas, hospitality tours, city tours , train tours, etc. Since there are many options that tourists can choose from, domestic tour operators often combine several tourist components into an inclusive package that they can sell to travelers within the boundary of the country.

Domestic tour operators form key partnerships with other tour and activity providers in order to attain a larger share of the domestic tourism market.

Receptive Tour Operators (RTOs)

Receptive Tour Operators (RTOs) provide tourism products to tour operators in other markets (as a business-to-business relationship).

Specifically, RTOs sell tourism products, whether they are sold in a tour package or alone, to tour operators and/or travel agents . They are essentially wholesalers and they don’t sell directly to the public.

So how do they make money?

They add a percentage rate (or fee) to the final price that the tour operator is selling the product or service for. When a travel agent buys the tour product, they incur the RTO’s fee in the final price. In that sense, RTOs do not charge commission. They simply market the tourism product and add their fee to the final product price.

Another key characteristic of RTOs is that they are experts in the region they operate in; and know much more than just the hotels and types of tourism activities that are offered in the region. As such, RTOs to help other tour operators identify things like hotels, services and design itineraries in regions they are not familiar with.

Ground Tour Operators

Ground tour operators operate domestically. They are however different from domestic tour operators in that they organize tours for incoming tourists on behalf of an inbound tour operator (and sometimes, outbound tour operators).

Let’s look at an example to better understand the role they play.

Italy will be the destination in this example. So, here’s how it works:

An inbound tour operator designs and promotes beach holidays, adventure, and heritage tours in different parts of Italy. Problem: the inbound tour operator doesn’t have offices across Italy. The inbound tour operator also doesn’t have close contacts or partnerships with suppliers and key agents in certain parts of the country. So, they consult with ground tour operators.

It is the ground operator that will handle the incoming tourists at those various destinations around Italy. They oversee land arrangements; negotiate with and contract local vendors; coordinate arrivals and departures; plan and put together local tour packages; escort tourists; provide market data; and cost and price tour packages. Overall, it is their duty to ensure that the entire trip goes smoothly based on the package tours and agreements.

You may know ground tour operators as “handling agencies” because they organize tours for incoming tourists on behalf of overseas tour operators.

Wrapping Up

Back to the question we asked at the very beginning: which type of tour operator are you? Now that you’re better informed to answer that question, you can also start thinking about ways to improve your distribution and marketing channels based on that answer.

The next step is to figure out who your key partners are and strike up deals to propel your business forward.

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Meaning of package tour in English

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• activity holiday
• air corridor
• amenity kit
• caravanning
• high season
• phrase book
• post-holiday
• put something up
• ranger station
• tourist trap
• trailer park

package tour | Business English

Examples of package tour, translations of package tour.

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• Union Budget 2024
• Goods and Services Tax

GST on Tour Operator Services

‘Tour Operator’ shall mean any person engaged in the business of planning, scheduling, organizing, arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport, and includes any person engaged in the business of operating tours. The definition is provided by the Explanation in Heading 9985 of GST Tariff Act, 2017.

For example, Make my Trip, Expedia etc. These companies provide a complete package of tour which includes Boarding & Lodging, Transportation, Local Sightseeing, Guides etc. Now a days, this business has become purely an E-commerce business and all the big companies have their own web portal and mobile app.

Come the new idea of businesses, come more challenges with more complexity and opportunity. With this article an effort is made to descript the Services of Tour Operator under the aegis of Indian GST Laws.

As per Heading 9985 of GST Tariff Act, 2017, The rate of GST would be 5% ( 2.5% CGST+2.5% SGST ) provided following conditions are met,

1. Input tax credit on services availed by the entity will not be available. However, Input Tax Credit on the services taken from other Tour Operator are allowed.

2. The entity shall indicate in its invoice that the amount charged is gross amount and inclusive of charges of accommodation and transportation

Therefore, if an entity offers a package to a customer for let’s say Rs. 1,05,000/- inclusive of everything, then the invoice shall be generated for Rs. 1,05,000/- ( Rs. 5,000/- being CGST & SGST ) and entity has to specifically mention in invoice that amount includes accommodation and transportation etc. No input tax credit on services like hotels, air tickets etc. will be available to the entity. However, Input Tax Credit may be taken on the tour operator services procured from another tour operator.

On the other hand, the entity may charge GST at the rate of 18% ( 9% CGST+9% SGST ) on the total amount. In that case, the entity will be eligible to take all input tax credit like rent, professional fee, lease line, telephone etc. on the services that the entity acquired for providing the underlined services i.e. Tour Operating.

However, most of the input tax credit will not be available to the entity due to the nature and place of supply of those services which are taken by the entity. The main expenditure that entity will occur would be of Boarding & Lodging and Hotel booking. In case of Hotel booking, the place of supply would be the location where the hotel is situated and thus the hotel will charge CGST & SGST on the invoice. If the entity is not registered under GST in the state where the hotel is situated, the entity cannot take the input tax credit on that particular invoice. Same goes with flight tickets. The place of supply in case of air fare, would be the place from where the flight embarks and in case the entity does not have registration under GST in the state from where such flight take-off, the entity cannot take input tax credit of that invoice too.

Let’s understand the situation with an example. Suppose, a customer from Delhi approaches Tour Operator which is situated and registered in Bangalore, Karnataka for a complete package of 5D/6N tour to Kerala. The entity quotes Rs. 1,00,000 ( Excluding GST ) for the tour. The breakup of the charges is as follows,

In this case, entity can opt either to pay 5% GST ( IGST ) on Rs. 1,00,000/- i.e. Rs. 5,000/- and avail no input tax credit or to pay 18% GST ( IGST ) and may avail input tax credit. But the entity is not eligible to take input tax credit on Air fare and Hotel charges as the place of supply, in case of Hotel, would be Kerala and in case of Air fare, it would be in Delhi. However, if the entity get itself registered in Kerala and Delhi, then it is possible for the entity to take input tax credit for these services also but that seems quite unfeasible considering the compliance burden which will be increased for the entity.

Further, in this case the entity must raise an invoice indicating specifically that the amount charged is gross amount and inclusive of charges of accommodation and transportation.

Though, most of the companies do operate as Tour Operator services, the entity may either provide services as an agent and charge commission on its service and take reimbursement in actual for the expenses that entity incurred for providing such services. Generally, small business entity opts for this model as in this model, the entity must pay tax only on the commission that it charges and not whole amount which is not even its revenue.

The entity may also opt to provide the underlined services on commission basis. In that case, the service will be categorized as ‘Intermediary’ and services like Boarding & Lodging etc. will be taken by the entity on behalf of customer. The entity will act as ‘Pure Agent’ and take reimbursement on actual basis from the customer.

As per section 2(13) of IGST Act, 2017 ,

“Intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account”

And as per the Explanation to Rule 33 of CGST Rules, 2017,

“Pure agent” means a person who—

• enters into a contractual agreement with the recipient of supply to act as his pure agent to incur expenditure or costs in the course of supply of goods or services or both;
• neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure agent of the recipient of supply;
• does not use for his own interest such goods or services so procured; and
• receives only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account.”

In this case, the entity has to enter into an agreement with the customer to act as his pure agent and authorize itself to incur the expenses for services like Hotel, Taxi etc. on behalf of customer. The entity, in this case, will charge its commission ( whatever agreed ) from the customer and will take reimbursement of the expenses on actual basis which it incurred on behalf of customer.

Let’s understand this with our previous example. In that case, if the entity enters into an agreement with the customer to act as pure agent, then the entity will charge GST at the rate of 18% on Rs. 10,000/- only i.e. Rs. 1,800/- and will take reimbursement of Rs. 90,000/- as actual expense incurred on behalf of the customer.

However, in this model, there are certain conditions which needs to be complied with. As per Rule 33 of CGST Rules, 2017,

“Notwithstanding anything contained in the provisions of this Chapter, the expenditure or costs incurred by a supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied, namely, —

• the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the third party on authorization by such recipient;
• the payment made by the pure agent on behalf of the recipient of supply has been separately indicated in the invoice issued by the pure agent to the recipient of service; and
• the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account”

Taking the previous example further, the entity has to raise an invoice for Rs. 10,000/- and add 18% GST thereupon and will indicate separately in the invoice for the payment made by the entity as pure agent on behalf of the customer.

A graphical flow chart will explain both the options in much better way,

In case the entity takes services of any other Tour Operator, let’s say for planning the itinerary for the customers for particular packages, the entity can take input tax credit regardless of his choice to act as Tour operator or Agent.

For better understanding, let’s continue with the example cited above. In that case, let’s say 25% is the fixed charges for the other Tour Operator which will come out to be Rs. 2,500/- ( on Rs. 10,000/- ). Now, the other Tour Operator shall charge GST at the rate of 5% ( i.e. Rs. 125/- ). In this case, the entity can take input tax credit of Rs. 125/- even if the entity has opted to pay tax at the rate of 5% on the total amount.

Let’s understand this with graphical depiction,

The GST shall be charged and paid at the time of payment or invoice whichever is earlier. Therefore, for the purpose of GST, the entity shall recognize its revenue on the payment basis.

However, if the entity opts to act as ‘Pure Agent’ the GST shall be charged when the final invoice is raised or the receipts of the commission whichever is earlier.

About the Author

Author is Amit Jindal, ACA working as Manager Taxation in Neeraj Bhagat & Co. Chartered Accountants, a Chartered Accountancy firm helping foreign companies in setting up business in India and complying with various tax laws applicable to foreign companies while establishing their business in India.

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95 Comments

Sir, I am working as an inbound tour operator. I wish to opt 5% of total amount without claiming ITC. But in my ledger ITC always crediting in and the tax amount is adjusting from this ITC credited and no option for challan creation for payment of tax @5%. Is there any method not to credit ITC in my ledgers?

As per article ,Tour operator (T1) can avail ITC on another tour operator T2.mean if tour operator T1 outsource the tour package to another tour operator,T2 then as per the article T1 can take ITC pass on by T2 if billed @5%. Can you please suggest me the notification/section reference as we have same matter in appeal and GST department disallowing the ITC taken on service of tour operator T2

Can a proprietorship Firm (Tour and Travels) charge gst under RCM to a LLP firm and other Proprietor.

Please Reply…

GST is getting complicated to understand,

This might be answered earlier however, let us take an example

We are purchasing a consolidated package from a B2B tour provider let say Rs. 10,500 which reflects as all taxes included. We are using ZOHO accounting to start with.

Under Purchase -> Vendor – Bill is rasied for Rs.10,000 with 5% GST as Inclusive Tax (10,000 + 5 % GST (Rs.500)) Under Sales -> Customer – Invoice , we have raised for Rs.10,500 +1000 = 11,500 with 5 % GST for Rs.10,500 (Inclusive) and 18% on Rs.1000 (Mark up Commission) Here 5 % GST is applied both on Vendor and Customer as Inclusive Tax.

But when we look at GSTR it reflects as Total Payable of Rs.575 (5%) +180 (18 % )

How is the contra entry for this applied, as if we pay 5 % on total it will be a double GST which is 10 % . What is the method to be followed.

Namaskar, this is Satish here from Rana Holidays, Kolhapur.

I need your kind suggestion regarding GST Calculations in below FIT – done by us…

Tour Sector – Mauritius

Taken from B2B Supplier in India – 2HUB – Pls find below Transactions

So what will be the GST in this???

MAURITIUS PACKAGE

Total Invoice from 2HUB Company in India

533957 + 13581 + 2444 = 549982 /- Rs + we have given TCS 30989/- Rs to them

We charged Client as per below

619776 + 30989 (5% GST) + 30989 ( 5 % TCS ) = 681753 /- Rs

So pls suggest how much GST i need to pay….

We are overseas tour operators. Can we pay 18% GST on gross receipt minus air ticket, foreign currency exp, visa exp etc or 5% on Gross receipt only ??

Dear Sir Please suggest, Please do not ignore my question 1.how to show reimbursement value in gst portal. 2.This is to be mandatory to show or not. 3.Can show this in exempt sale.

hi, i am working as commission agent for tour operator based out of India, we collect payment in INR in our Indian registered company account on the behalf of the company based outside country and we make remittance overseas as bulk for all the bookings payment come to us , will the gst 18% applicable on the service charge part only , please guide ?

We are agents for cruise operators who are based outside India. The cruises start and end outside India. We are paid commission for booking Indian passengers on the cruise.

Should we invoice the cruise only part and charge 18% GST on our commission. Or charge 5% GST on the gross.

How is TCS added to this Invoice? Is TCS 5% of the total of (Cruise only + commission + 18% GST on commission. )

I m tour planner and serve whole tpur package service for the tourists. Can I apply 5% on some bills with No ITC claim and 18% on some bills with ITC claim on same month/returns. Suppose I served 6 tours in a month then Can I generate 4 bills on 5 % and 2 bills on 18% slab?

We are franchise of a reputed online travel agency dealing in online and offline tour operator…we earn commission for every sale from the agency and 5 %GST of the entire sale value is collected by the agency on customers behalf…customer is billed directly by the agency….please guide our GST output as we do not have any ITC and are paid commission as intermediator. Also what’s the scenario if total commission crosses 20lakhs in one fiscal year

Namaskar, We are Working as Tour Operator. We are providing Hotel Booking services to B2C and B2B Client.

On Hotel Booking service: Eg. – We Got Hotel at 2000 and we offered same hotel to our B2B Client at 2500 It that case having following queries: 1. Is SAC code 998555 is correct for it. 2. Is it correct for Invoice ? total Billing Value 2500 and Taxable Value 500 { and 9 % CGST and 9 % SGST on Rs. 500/- }

Request to advice following confusion I am in Mumbai buying a package tour with all transport hotel from a tour operator in Assam cost Rs 45000 he is charging me + 5% GST on 45000. I am charging client 55000 with Rs 10000 margin + 5% GST so question is already the tour operator is paying 5% on 45000 so i have to pay 5% on 10000 only or total 55000 plus 5% ? Or Pay 18% on 10000 margin only? we are registered with both 18% and 5%. As for the same client tour operator is paying 5% on 45000 and i am asking cleint 55000 plus 5% so 10 percent on the same client paid at GST ? confused please help

You can either pay GST @ 18% on Rs. 10,000/- and show Rs. 45,000+5% GST as reimbursement of expenses as actual. In this case, no ITC available

You can pay GST @ 18% and take ITC on GST paid on Rs. 45,000/-

You can pay GST @ 5% on Rs. 55,000/- but ITC will not be available.

You have to explore these three option by analysing which benefits you more.

For more details, you can reach out to us on our website

Dear Mr. Joseph, the basic condition being a tour operator is that you provide the services all inclusive, that is to say you don’t give the bifurcation of the amounts charged, say commission etc. You are just invoicing your customer for the package as a whole. So in your case, you will be invoicing your customer, in your example, for 11,500 (exclusive of GST) without showing the markup amount. Now, on such bill, you will be charging GST @5% which comes out to be 575.

Since, you have also taken the input tour operator services, and ITC of 500 is available, your net cash payable will be 75 only. Hope this makes sense.

Dear sir Please reply of my question My question is For example:- sale Total invoice value. 111800 Reimburseable. 100000 Margin /taxable 10000 GST@18%. 1800

Now here my question is

1 What should be value of total invoice, As above mentioned sale example we have to show total invoice value -111800 Or 11800 in GST R 1 or GST R3B in B2B transaction case. 1 What should be value of total invoice, As above mentioned sale example we have to show total invoice value -111800 Or 11800 in GST R 1 or GST R3B in B2C transaction case. 3.how to show reimburse amount in GST R3B or GST R1

4 .what we have to show reimburse amount in exempt supply or not.

The invoice value will remain 1,11,800.- but the actual ale will be considered as 11,800/- (Rs. 10,000/- your commission/margin and Rs. 1,800 as GST). When you raise the invoice, you will indicate Rs. 1 lakh separately for reimbursement of actual expenses which were incurred on behalf of client. In returns also, the sale value will be 11,800.

Please reply what will be invoice value in gst return.

Dear Sir Can we show exempt sale of reimbursement value. Please reply

What is the HSN code or SAC when we are charging 18% on the commission earned

i charge bookings on per head basis including food. what GST should i charge and what code should i use? can i take ITC?

You can charge 5% GST where ITC will not be available else charge 18% and avail ITC

Booked 2 hotels in HP for client based Mumbai. One hotel is giving gross invoice for which we will raise a commission invoice and other hotel is giving net invoice both billed to us. Can we show Hotel cost + commission charged to client + 18% on commission? If so, do we show gross amount of hotel 1 & net amount of hotel 2?

Please elaborate your query a little more. Whether you will charge commission to hotel in case where hotel is giving gross invoice or to customer and whether both hotel booked for same customer.

Dear Sir, We will charge a commission to the client. Both hotel bookings are for the same client. We will also raise a commission invoice on one hotel that gave us a gross rate; this will be our additional income. We will invoice the client for reimbursement of hotel room bookings total of gross & net hotel invoices and add our commission. The client and tour operator are based in Maharashtra while the hotels are in Chandigarh & HP.

On the commission invoice to hotel, you have to charge IGST at 18% and on invoice to customer you will charge 18% CGST/SGST on the commission only and rest will be shown as reimbursement. Else you can charge 5% on the total invoice to customer but in that case input won’t be allowed. You can contact us through our website for detailed legal opinion.

Thank you Neeraj ji.

We received advance from the customer for tour packages and we give cancelation option also to customers, Kindly let us know we need to book the GST liability at the time advance received or at the time of travel date?. as many tours get canceled before travel date, it is difficult to manage to reversal of GST liabilities.

As per GST Laws, you have to book GST at the time of receiving advance and also have to reverse the same when the customer cancel the booking. You can follow the other practice which almost every tour operator do. When the booking is canceled, don’t pay back the GST amount and correspondingly, don’t reverse the GST. You can tell the customer that this much amount is cancelation charges.

Can we make interstate supply while we are paying 5% gst under this scheme

Yes you can.

Hi, When we raise invoice in tours and travels supplier point of view, please answer whether GST is applicable for TOLL and BATA

In case of hotel booking through online platform like Make My Trip, whether the hotel should issue invoice to the guest (B2C) or to the online service provider (B2B)? Here consideration received by the hotel from the online service provider

Yes, the invoice should be to the customer. Online service provider works as a pure agent.

How to file GSTR 1 and GSTR 3B for Travel Agents. Only for railways and flights.

I have a tour oprater service and as itc process if i make 5% gst bill then i am not eligble for itc..I know than but my main quation will get the ITC for other like . i am spening the mony on facebook ads and they are charging me 18% GST will i get the GST itc for this .. if i purhessed any laptop for office purpers and i take the GST bill form Shop then i ma eligible to claim the GST for laptop

In case you are making 5% GST bill you cannot take ITC of Facebook bill and also not of Laptop bill

Its Possible if i make 18% gst or 5 % GST bill. example : I have 6 sales invoice and I make 3 sales Invoice in 18% GSt & rest 3 for 5% GST for any month not every month will i eligble for ITC for all like. facebook, laptop or other purches etc.

Or Its possbile one month i make 18% GST for claim ITC and 1 month 5% GST bill..

You can do that too.

Yes you can take input proportionately. You can take all the input and then reverse proportionately in the proportion of 18% supply and 5% supply. For detailed assistance on this you can connect with us.

Dear Sir Please advise on following question.

We are tour operator and charge GST@5% from our guests. Can any of the guest claim this GST credit against this invoice ? For example, I sold a package tour including hotel and transportation for Rs. 25000+5% GST. We paid 5% GST to govt. We have issued invoice to guest mentioning package cost Rs.25000 + GST. Now can the guest claim credit against this invoice ? There are different answers received on this platform but not satisfactory. Kindly advise. Naresh

Your customer/guest can take input tax credit of this 5%. But you cannot take any ITC for paying out your GST liability except that ITC which is on the services taken by you from other tour operator. You can write to us on our email id detailing your query, and we will reply accordingly.

applying for new GST registration for Tour operator, but stuck in between. as Tour operator is not mentioned specifically under the Business type/category. please advise what category to be selected and what will be HSN number.

If there is no specific category mentioned, you can select Others. The HSN code is 998555.

I have started a new travel agency, Now As of things will charge 18% on flight bookings and 5% on cabs,hotel,visa. .Now my question is should I charge these GST on my margin (Ie 1000₹+18% was flight ticket and I sold for 1200₹) then my invoice to client should like (1200+18%) or (200+18%) for flights..if it’s (1200+18% then invoice value is 1416₹ which he can claim, oR (200+18% =236₹) which he can claim

Second , I’m getting an invoice from hotel people for 12% but I’m giving to client as 5%.. so it should be on whole amount or only on my margin should give ..

Please advice

Regards, Sheriff

Please advice…

In the case flight ticket booking, you have to charge GST at the rate of 18% on the commission value i.e. in your case you have to charge GST on INR 200. In case of hotel booking, you can charge GST both ways either on whole value or only on the commission. In case you are working on commission basis then GST rate would be 18%. In case you are charging GST on the whole amount, GST would be charged based on the room tariff as below,

INR 7,50028%

If room tariff is below Rs.1,000 then there would be no GST. If it is between Rs.1,000 -2,499.99 then the rate would be 12%. If it is between Rs.2,500 -7,499.99 then 18% and if it is INR 7,500 or more the rate would be 28%. For more detail on this you can reach out to us on our website

Sir my vichele is in tender under govt hospital for staff duty … i will pay 12 percent gst and my annual income is less then 5 lakh what can i do? I should pay or not plsase tell me

If your annual income is less than 5 lakh then you need not to get registered under GST and if you are not registered then there is no liability of GST on you for the services you provide

Dear Sir can we take input tax credit on Input goods & assets or other support service credit while we obtaining 5 % GST Slab ??

No, you cannot.

Dear Sir Can a travel company work as both method as a tour operators and pay 5% gst on whole amount ,and take ITC in case purchase package from other tour operator. As a travel agent and pay gst 18% only on service charge with itc.

Yes, you can work both ways simultaneously. But in that case you have to maintain separate record

I am own a transport which provide staff travelling to company. In this case I have two client 1 client asking for 18% and 1 client asking for 5% while I have one transport can I gave two different types of GST percentages. Can anyone suggest answer for my question

Yes, you can.

What if I am providing Tour service to Government department. is 5% tax applicable to me. As I am charging 5% tax in B2C and government department is paying RCM and not paying me 5%.

Sir I have made partial advance payment of total tour package but now tour is canceled, now I am asking for refund but tour operator says that we have paid 5% GST so this amount will no be paid. Please suggest & confirm.

You are eligible for GST refund also on the proportionate amount of advance that you have paid. You need to talk with the tour agency and ask them to give you a credit note for this.”

Some a portal charged 5% TDS on commission earned (Not 18% GST on commission).

In case airline ticket breakup is Base fare : 13,319, Other Taxes :578, K3 : 668 = 14,565 (Gross fare) Less (Commission earned ) = -327.65 Add (TDS deducted 5% of comm) = 16.38 Nett Payable Amount 14254/-

Can you please advice me how to raise tax invoice if I sell it @14,500 How to get ITC ?

Sir How to Generate invoice only in flight tickets booked by clients. What will be the procedure to claim GST?

In case flight ticket is booked by client himself then you will bill for only your commission as agreed upon and charge GST @ 18% thereupon. You cannot take input on that because the invoice is in the name of the client and not you.”

Sir, we are a travel agency offering bungalows, villas, tours packages and various services. What GST we should charge particularly on bungalows, villas, hotels to our client. Is it on the commission, if yes then customers might clearly know the business inside out and might refrain doing business with us in future. Also on what amount we have to file our ITC to get rebate or input tax credit

Hi Thanx for such an elaborate GST guidlines for travel agents. I just have a question: Many a times guests want a GST credit from their Flight and Hotel Bookings done through us. But these days most of the Travel agents use consolidators inventory for the same and don’t have option to put guests GST in those bookings so that he can get back the GST input. How to deal with these?

Also, in international bookings, how to deal with such GST issues?

Thanx. Atin.

Sir, please clarify, if the entity is working as a pure agent and charging 18% GST on the commission amount only. Will ITC be available on that GST amount on commission?

How much percent gst on visa to be charged to customer as a travel agent

Sir i am a travel agent in Port Blair , if my package cost (separate cost) HOTEL – 22000 CRUISE – 15000 VEHICLE COST = 8000 SERVICE CHARGE = 2000 THEN HOW CAN I GENERATE MY GST BILL , PLEASE ADVICE

How to show reimbursement amount in gst return . If tour and travel agent company paying margin basis gst.

I am working in a tour and travel agent company. I have a problem or confusion in gst return filling that if we are paying tax on margin basis in gst then I want to ask you how to show in gst return . What we have to show reimburse value in gst return in 3b or R 1 as a total invoice value . Please suggest me.

Hello Sir, Whether it is allowed to opt for both the options in the same financial year ie to pay GST @5%/18% for some clients and also act as a pure agent and charge GST @18% on commission for some other clients

Dear sir If we are working as a tour and travel agent and paying gst on services charge , Then in this case how to show total invoice amount in gst return. Suppose we give package to client Rs -1,00,000 including services charge.

Our purchase for of client is -85000 Our magin is -15000 Taxable. -12712 Gst,18%. 2288 Total. 15000 Then in gst return what total invoice value We have to show in gst R1 15000 or 100000 And in gstr3B what taxable value we have to show. -12712. Or another value . Please suggest me .

Where tour operator is preparing invoice on pure agent basis charging gst on only commission amount and taking only reimbursement of hotel booking, whether hotel invoice will be in the name of your operator or the client of tour operator who is service receipent? In case tour operator take hotel invoice in own name, what will be the consequences?

If a company is operating as a pure agent in few places , and as tour operator in few.. Can it bill 18% & 5% respectively and file in GST returns ?

Dear Mr Neeraj, In the below explanation, Is 18% mentioned assuming that the Tour operator has opted for the 18% GST ? or is it charged at 18% for both cases i.e 5% and 18% ? “Let’s understand this with our previous example. In that case, if the entity enters into an agreement with the customer to act as pure agent, then the entity will charge GST at the rate of 18% on Rs. 10,000/- only i.e. Rs. 1,800/- and will take reimbursement of Rs. 90,000/- as actual expense incurred on behalf of the customer.”

Hi Sir, you said generally small businesses act as pure agent and charge GST on commission/ Service charges only, Suppose a tour operator make hotel bookings not as per client requirement i mean fixed number of bookings every month then this tour operator aslo need to charge based on slabs? or how can this is chargable when he sell to their customers

Dear Sir, thanks for your advice. i just want to know the input tax credit allowed between two operators from same service – there is still doubt in this in many minds. So want to find out which particular section is this allowed under the Act? – input credit is allowed from same serivce in B2B. which particular section?

thansk and regards

Dear Sir please check also my quary

Simple and Lucid Explanation. Very nice and helpful

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