Mark Pestronk
Mark Pestronk

Q: I have a unique idea for a travel agency and would like advice on some of the first steps I should take. I want to get going as quickly as possible, so I would like to know the fastest way to get reservations and ticketing capability. As I see it, the basic choice is to apply for a new agency appointment or to acquire an existing agency. One year into the pandemic, there must be lots of ARC agencies for sale at a cheap price, so my inclination is to go the acquisition route. Do you agree?

A: The threshold question isn't whether to go the new-agency or acquisition route but rather whether you need your own ARC appointment at all. It may make more sense just to use another agency's appointment.

There are probably dozens of host agencies that will make the reservations and issue tickets for you. Some will give you GDS access if you have a travel advisor with GDS experience, and others may give you your own, unique GDS-assigned identifier.

Finally, some hosts may even provide you with a branch-office appointment of your own. While your company won't qualify as a branch under ARC's definition, some hosts are able to provide a branch appointment anyway.

Assuming that you don't want to depend on another ARC-appointed agency, the new-agency and acquisition options are very similar to each other. ARC requires both applications to meet nearly identical criteria concerning ownership history, bond or letter of credit and personnel with advisor experience and ARC Specialist certification.

The acquisition route is faster if the seller lets you take over the agency before ARC approves the change of ownership. Jumping the gun is, however, a violation of the ARC agreement for the seller.

If ARC ascertains that the seller has allowed you to assume control of the agency before ARC approval of the change of ownership, ARC has the right to take adverse action against the seller, including suspending its right to issue tickets in certain circumstances. Worse, if the buyer commits credit card or ticketing fraud or fails to pay for tickets it issues, the seller's owner may be personally liable for the debt.

For a prospective seller, the solution is to retain control of ticketing and ARC reporting while treating the buyer as a client or hostee whose needs the seller services. Once ARC approves the change, the seller is off the hook for any subsequent fraud or default.

The new-agency route has its advantages, too, if you can wait a few months for approval. It is certainly cheaper than an acquisition, and you will not have to deal with a seller's creditors, who may try to pursue you even if you are not liable for the seller's debts.

One potential drawback of the new-agency route is that a few airlines require new ARC agencies to apply directly to the carrier for a "specific appointment," which could delay your ability to ticket on those airlines. 

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