It’s not that you need lots of money but rather that you’re going to need cash flow. Imagine that you are going to start slowly and operate just one tour, that you don’t have a track record in the tourism industry and that you are not going to rent an office or hire salaried personnel at the outset. You must develop the trip and book it first – then try to sell it; it’s not considered ethical to sell a trip you don’t have booked.
There will be two categories of major upfront expenses – deposits with suppliers and marketing. The hotels you select may want a one-night’s deposit when they send you a contract. Airlines will most likely require a $100 per seat deposit on international flights or perhaps $50 on domestic flights. If using a tour operator, they often want a flat $500 non- refundable deposit. Of course, it’s all negotiable and if you have used these suppliers before, they may be less demanding.
Your marketing expenses will include developing and printing a trip brochure, postage for any direct mail you anticipate, and advertising (online and perhaps in print publications).
You will not be able to use your clients’ deposit monies as they book to cover your upfront operating expenses. Their monies are sacrosanct.
Therefore, as you can see, at the outset your access to operating monies is all-important. It’s also important to note that if your tour does not operate, your upfront expenses may not be retrieved so the risk factor should be carefully weighed in your decision to undertake this first venture.