Travel agents say future is bright

By focusing on tours and competition, agencies make profit despite lack of support.

Shahram Haq July 24, 2013
Agents these days not only arrange for tickets but also provide services for their clients who are planning to fly abroad, such as arranging visas, hotels and travel accommodation. PHOTO: APP

LAHORE: The tourism industry in Pakistan is practically on the verge of collapse. Yet for the 5,000 registered travel agencies in Pakistan, business may just be growing. While inflows of foreign tourists may have reduced, travel within the country and international tours have gone up, and more people are turning towards travel agents to plan their trips.

“People who follow global trends and keep up with local demands are earning a lot of money in this business”, says Wahid Mukhtar, director of Travel Hut, a Lahore based travel agency. Agents these days not only arrange for tickets but also provide services for their clients who are planning to fly abroad, such as arranging visas, hotels and travel accommodation.

According to Mukhtar the margin in selling a ticket is very low compared to the margin in arranging a tour for a person or family. “For travel agents the sale of 10 international tickets is equal to revenue from a single international tour we can arrange for a person,” Mukhtar says.

Still, this is a relatively new phenomenon. Mukhtar says: “Only a handful of agents do this, some of course still revert to the same traditional things like arranging for Hajj or Umrah.”

Travel agencies have been helped by new tax policies. Travel agencies previously received 9% of the fare price as commission, of which 10% was required to be given to the Federal Board of Revenue as tax. However, this commission has now been replaced by service charges, which is 7% of the fare price, except this time agents are free to decrease or increase their charges according to market competition.

On the whole however, travel agencies find little support from the government. “Other countries support their economies by promoting their travel and tourism industries but in Pakistan this industry is given the least priority despite the huge potential,” says Muhammad Iqbal, Chairman of the Travel Agents Association of Pakistan.

For Iqbal, the issue lies with the 18th Amendment, which called for the devolution of all ministries. This means that the tourism industry is currently under the supervision of several departments including the Federal Board of Revenue, provincial Tourism Departments, Federal Investigation Agency, and the Ministry of Defence. “This industry should be under federal control since it is hard for us to answer to so many departments,” Iqbal says.

The mismanagement hasn’t bothered some travel agencies though. For example, there are about 1,250 agencies in Pakistan registered with the International Air Transport Association (IATA). IATA is a Canada based association formed to represent the airline industry by regulating airline rules and to act as a price setting body for international airfares. IATA members have more ticket quotas for every airline, so non IATA members have to rely on IATA members to run their businesses. This leads to huge revenues for larger travel agencies in charge of handling the business for smaller ones. One travel agency operating in Pakistan with 68 offices earned revenue of around Rs 400 million from a single branch in Lahore.

“There is a need to streamline this unorganised industry by making some laws as there are still loopholes, which can lead to tax evasion and fraud,” said Mukhtar.

Published in The Express Tribune, July 25th, 2013.

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