Two things a new agency can do without

Mark Pestronk

Q: Before the turn of the century, a new travel agency needed to obtain ARC and Iatan appointments and sign a multiyear GDS contract. Nowadays, it seems like most startups are simply joining host agencies that have their own appointments and reservation system access. If someone were starting a travel agency today, which route would you recommend, and why?

A: I wouldn’t bother with an ARC appointment and would not sign a GDS contract. The burdens and risks involved are substantial and the comparative advantages almost nonexistent.

While ARC has become kinder and gentler in recent years, agencies must still sign its standard contract, called the Agent Reporting Agreement, which runs 59 pages (including attachments) and consists of a set of rules agencies must follow, including personnel and bonding requirements. The agreement is not negotiable, and amendments are issued periodically that you must agree to.

If you do obtain an ARC appointment and use it for ticketing, most airlines will pay you zero commission; most cruise lines, tour operators, hotels and resorts will pay you industry-standard 10% commissions, and most car rental companies will pay just 5% on leisure bookings and nothing on corporate bookings. It may take years before you grow enough to be offered more compensation.

In contrast, with a host agency, you sign a contract that is somewhat negotiable and has far fewer rules and requirements. You have to split commissions with the host, but your share alone may well exceed industry-standard percentages.

Although ARC offers useful training and support in areas such as fraud prevention, startups are eligible to access these programs through the host’s ARC appointment. ARC offers a simplified, nonticketing appointment, called Verified Travel Consultant (VTC), but again, you can access the programs via the host’s ARC appointment instead.

For GDS contracts, there is almost no upside for startups. Most contracts have three- or five-year terms, and most contain booking quotas with penalties for failing to achieve them. While some vendors offer one-year contracts with no quotas, booking incentives will most likely be zero.

In any case, unless your specialty is higher-volume corporate travel, which typically requires rapid and repetitive bookings, most startups will probably find that there is little advantage to using a GDS at all. The same content is available through some hosts’ own systems or supplier websites. If, nevertheless, you want to use the GDS, many host agencies offer GDS access with no strings attached.

Some startups seem to find an advantage in having their own Iatan or ARC VTC appointment, as they can sometimes negotiate separate deals with suppliers the hosts don’t deal with. An Iatan appointment also provides the opportunity to obtain an Iatan card for your personnel, which sometimes enables you to obtain industry discounts for personal travel.

The burdens of signing with ARC and a GDS are one of the reasons behind the increasing verticalization of travel retailing; I wrote about this in my Feb. 13 Legal Briefs column.

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