Understanding Tour Operations Management

This report provides an understanding of tour operations management, including the roles and functions of tour operators, the scale and structure of the industry, and the impacts of integration. It also includes a step-by-step guide on creating and costing a package holiday, a comparison of tour packages from different operators, and an exploration of strategic and tactical decision-making in tour operations.

An understanding of tour
operations management

Contents
INTRODUCTION...........................................................................................................................3
PART 1............................................................................................................................................3
Exploration of the different roles and functions of a range of tour operators........................3
Explanation of the scale and the structure of the tour operating industry..............................4
Evaluation of the impacts of integration on the scale and structure of large mass-market and
independent specialist tour operations....................................................................................5
PART 2............................................................................................................................................5
(i) Produce a ‘step-by-step’ guide on ‘How to create a package holiday’ to be used by a
trainee in the product development department of a tour operator as part of their induction
programme..............................................................................................................................5
(ii) Produce a ‘step-by-step’ guide on ‘How to cost a package holiday’. The calculation of a
holiday price should be based upon the luxury coach and educational tour for summer 2022 at
one hotel under contract.........................................................................................................7
PART 3............................................................................................................................................8
Comparison of tour packages of 2 tour operators..................................................................8
PART 4............................................................................................................................................9
An exploration of examples of strategic and tactical decision-making in tour operations....9
An assessment of external factors that adversely affect strategic and tactical decisions and
recommend responses...........................................................................................................10
A critical evaluation of recent strategic and tactical decisions made by tour operators making
valid recommendations for improvements...........................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Tour operations industry is identified as the fastest growing sector worldwide which
evolving at constant basis. Growth of this industry is not only contributing in the development of
this industry but at the same time it is placing its own level of contribution in the economic
development of the nation (Allahyari, Salari and Vigo, 2015). Tour operators are further
determined as the essential part of the tourism sector which are developing range of facilities for
traveller in terms of tour packages. These efforts placed by tour operators directly contribute in
the development of the industry in rapid manner. The present report is based on TUI UK, a
multinational travel company which is headquartered in Hannover, Germany. The respective
company was incorporated in the year 1923 and have developed strong image worldwide as it is
offering range of services like scheduling airlines service for travellers, developing effective
holiday packages, hotels, resorts and cruise lines.
This is report is bifurcated in 4 sections. The first part provides detailed explanation on
role, structure, entity, functions and types of tour operating industry. It further explores various
development stages of holiday packages. Along with this, it further assesses various tour
programmes that contribute in meeting need and requirements of target markets. In the last
section, examination of strategically and tactical decisions are evaluated by several tour
operators.
PART 1
Assistant product development manager of TUI have developed an article which contains
information associated with tour operating sector. This article will be further provided to new
apprenticeships so that they can develop their understanding over the industry and also
contributes in its future development. Ranges of information covered in this article are stated as
below:
Exploration of the different roles and
functions of a range of tour operators
Explanation of the scale
and the structure of the
tour operating industry
Evaluation of the
impacts of
integration on the
scale and structure
of large mass-
market and

independent
specialist tour
operations
There are different types of tour operators
who serve this industry in effective manner.
Main type of tour operators are
independent, domestic, incoming, outbound
mass-market, specialist etc. All of these
kinds of our operators have their different
roles as well as function (Buckley, 2014.).
Some main among them are explained as
below:
Outbound mass market: These
kinds of tour operators are the one who
dominates outbound market from many
years. Tour operators belonging to this
range mainly sold similar kind of tour
packages worldwide. These packages are
mainly offered at larger scale of market
worldwide. The main role of these types of
tour operators is to develop package in such
a manner that could satisfy customers
belonging to mass market. In order to
perform this in rightful manner, Tour
operator’s males’ use of strong marketing
tactics and develops new packages for
customers in order increase its sales
performance.
Domestic: These types of tour
operators are the one who provides tourism
related services to the tourist within their
Structure of travel and
tourism sector mainly
includes information
associated with different
components, functions and
aspect of respective
industry. In order to develop
understanding over it, it is
essential to develop
knowledge on every
associated aspect that
initiates from supplier to
customer (Cetin and Yarcan
2017). Travel and tourism
sector of UK is mainly
divided into three sections
which are public, private
and voluntary. It is
essential for the travel and
tourism sector to develop
their understanding over the
needs and requirement of its
customers so that they can
serve them in the same
manner. In order to execute
services to customers, tour
operator belonging to this
sector follows strong chain
There are mainly
two main types of
integration within
tourism industry.
These are vertical
and horizontal
integration. This
integration directly
places influence
over the customer
choices and also
places impact over
the decision making
made by them while
buying product or
services from this
industry (Chand, and
Katou, 2012).
Vertical integration
simply means that
products and
services of
belonging to tourism
industry are
available for the
customers belonging
to different
businesses as

native country. In this, the main role of tour
operator is to serve tourist with best
services within the home country. The main
function of these tour operators is to plan
tour, make package, provide travel
information to clients, perform reservation
associated activities etc.
Specialist: These tour operators are
the one who serves tourism sector within
the special zone only. These operators
develop packages for different zone like
family holidays, special wildlife, cross
country skiing, safaris etc. The common
role of Specialist tour operators is to
determine specialised zone of its potential
customers (Chand and Dahiya, 2014). In
this regard, essential function associated
with the same is to develop to plan of
package and then execute reservation
associated activities for enhancing sales.
Independent tour operators: In
this, independent tour operators develop
travel packages for tourists at their own
level. This simply includes tourism services
like accommodation, itinerary, transport
and other associated services belonging to
holiday package. The main functional role
of independent tour operators is to
formulate tourism package for customers
which includes all of the associated service
to the same.
of distribution according to
which they can easily
deliver their services to the
end user in rightful manner.
The chain of distribution of
tourism industry is has five
main components that is
Hotels, transport
companies, tour operators,
travel agencies and at last
customers. This chain of
distribution is adopted by
every associated company
as per their core
requirement and feasibility
(Chon and Yu, 2012).
distribution chain of
respective industry
is very strong. This
simply allows tour
operators in
developing their
strong relationship
with the customers.
On the contrary,
main focus of
horizontal type of
integration is to
serve customers in
lucrative manner by
providing them
additional services
(Deresky, 2017).
This ultimately
supports company in
developing its strong
image in front of
customers. Both the
kind of integration
simply provides
support to the
industry tour
operators in
developing their
relationship with the
customers.

PART 2
(i) Produce a ‘step-by-step’ guide on ‘How to create a package holiday’ to be used by a trainee in
the product development department of a tour operator as part of their induction
programme.
Planning is considered to be an essential as well as inseparable element of tourism industry
as it lays down the foundation upon which the working of variety of tour operators is based. In
this regard, it is identified that it is important for tour operators to develop package holidays so as
to gain the attention of large number of individuals. Planning is essential to be executed in
relation to every stage of holiday package development (Dhiman, 2012). As per the present
scenario, TUI is organising a holiday package for an escorted luxury coach and educational tour
for a total of 50 students for 7 nights within the confines of Ghent. This holiday package would
occur from United Kingdom to Belgium encompassing places such as Ghent, Brugge, Ostend,
Antwerp, and Brussels. It would take place in the summer of 2022. Thus, the stages for the
development of this package plan are described in detailed manner as follows:-
Market research and forecast: This stage is concerned with execution of forecast
regarding the constant changes taking place in the patterns of consumer demands. In this relation,
while devising the holiday package for summer trip of 2022, the tour operator within TUI would
take into use a wide range of research methodologies. Further, the firm would be capitalising
upon the variety of sources and their interpretation to gain knowledge about the strategies
adopted by rivals. As a result of this, TUI devises an effectual strategic marketing plan.
Capacity and contracting: This stage is concerned with the procedure of entering into
contracts with vendors for the purpose of transportation, ancillary facilities, and accommodation
and so on. The students would be staying for a time period of 7 nights, thus it is quite essential
for TUI to enter into such contracts so that the trip aids the travellers in gaining satisfaction.
Costing the holiday: This is associated with ascertainment of cost of the overall holiday.
A tour operator takes into account several aspects while determining the cost of developing a
holiday package (Filby, Stockin and Scarpaci, 2015). In this regard, TUI would take into account
factors such as load factor, transportation seat costs, accommodation cost, transfer costs, fixed

and variable cost, mark up, profit margin, distribution cost, agency commission and many more.
The entity aims to keep the cost of package low.
Pricing: The pricing strategy for holiday package is concerned with selection of one of the
available options such as seasonal flexing, competitive pricing, skimming, special offers and
discounting strategies. In this regard, TUI has decided to make use of competitive pricing
strategy in order to stay aligned with the market and rivals operating within its confines.
Brochure Production: The next phase in the holiday package development timeline is
related to creation of an attractive and appealing package that would gain the attention of
audience towards it. In this regard, TUI would be making use of 3D Print Brochure for the
students so that they can be positively influenced by it.
Marketing and Sales: This being the second last stage of the holiday package
development is concerned with the usage of wide range of channels through which marketing
and sale of packages created by company can take place (Gibson, 2012). In this regard, TUI
would be making use of online and offline brochures as well as website for marketing purposes.
Critical Path Analysis: This stage is related to execution of a mathematical process which
is aimed at calculation of schedule of a project. Initially, it ascertains the extent to which an
action can be executed in the earliest possible manner, i.e., its early start and finish dates. Along
with this, project finish can also be determined. With this, the slack or float of an activity can be
calculated by TUI.
(ii) Produce a ‘step-by-step’ guide on ‘How to cost a package holiday’. The calculation of a
holiday price should be based upon the luxury coach and educational tour for summer 2022
at one hotel under contract.
Holiday price can be defined as the price which is arrived at after taking into consideration the
profit margin. The cost of holiday for 50 students for 7 night tour in Ghent is ascertained as
follows:-
Accommodation cost is 130 Euros per person.
Total Accommodation Cost (in £) = 130/1.12*1*50 = £5803.57
Facility Price (in £)
Accommodation Cost 5803.57

Cost of Luxury Coach 7600
Charges of visitor attraction (55/1.12*1*50) 2291.67
Tour Guide Charges (960/1.12*1) 857.14
Total cost 16552.38
Add: Profit margin @25% 4138.095
Selling Price 20690.475
The selling price of the overall holiday package is ascertained to be £20690.475 and per
person price is £413.8095.
PART 3
Comparison of tour packages of 2 tour operators
Tour package is regarded to be the most appealing part of the travel and tourism sector as this is
what sets the base for organisations to appeal to the customers. With the help of lucrative and
attractive tour packages and brochures, tour operators are able to gain the attention of large
number of travel persons (Guo and He, 2012). In this regard, it is important for tour operators to
take into account theirs as well as competitive tour packages as well as brochures in order to
ascertain the shortcomings and scope of improvement. Thus, looking upon this, the management
of TUI has considered to execute a comparison of the holiday tour packages of their company
along with one of the local market tour operator name Cosmos Holidays. In relation to this, it has
been determined that the location that has been selected to set comparison and contrast of tour
packages is Greece. Therefore, the contrast and comparison lying between the tour packages of
TUI and Cosmos Holidays for a common location (Greece) is given beneath:-
Cosmos Holidays
(https://www.cosmos.co.uk/tours/
TUI
(https://www.tui.co.uk/destinations/europe/greece/

athens--7-night-eclectic-aegean-
islands-cruise/)
holidays-greece.html)
This organisation provides customers
with 2 options, either to book only
the travel tour or to book tour with
flights and transfers.
This organisation provides customers with only 1
option that is to book the tour with flights and
transfers.
Their tour packages for Greece start
from 1899 pounds per person for tour
only and 2169 pounds per person for
tour along with flights and transfers.
The pricing of their tour packages for Greece start
from 208 pounds per person.
The locations that are included within
the package of Cosmos are Istanbul,
Athens-Piraeus, Canakkale¸ Volos,
Heraklion, Santorini–Mykonos and
many more.
The locations that are a part of this tour package are
acknowledged to be Santorini, Mykonos and
Skiathos, Halkidiki, Kalamata or Parga and many
more.
The company provides the option of
incorporating changes within the
package as per the preferences of
customers.
This company also provides the option of
customisation within the tour packages so that the
needs, wants and demands of customers can be
effectively satisfied in due course of time (Holland
and Leslie, 2017).
PART 4
An exploration of examples of strategic and tactical decision-making in tour operations
Tour operators mainly take two types of decisions that is tactical and strategic decision.
Strategic decision are mainly determined as those ones which simply depicts how tour operators
positions themselves at market place differentiate themselves with other tour operators. Few
main examples of strategic decisions is offering quality products at moderate prices in order to
attain competitive edge (Jaafar and Maideen, 2012). Another example for the same is involving
into CSR activities for developing positive image of the company in front of society. This will

directly help them out tin attracting maximum number of customers towards them. On the other
hand, tactical decisions are mainly defined as those one which are taken by tour operators by
observing market or external scenario. The main motive of this kind of scenario is to provide
response to external market situation and convert the situation in the favour of the respective
firm.
Practical examples of both kind of decisions taken by tour operator of TUI and Cosmos are
stated as below:
Type of decisions TUI Cosmos
Strategic decisions Tour operators of this
company believe in taking
strategic decisions associated
with the pricing strategies.
The respective tour operator
do not prefers to provide
additional discounts to any of
its customers in terms of
references or any other
(Khairat and Maher, 2017).
The overall discount provided
to the customers is common
and equal for all.
Tour operator of this
company believes in taking
strategic decisions related to
the product choices. In this,
every new product is
developed with the motive
of fulfilling needs and
requirements of its
customers in appropriate
manner. Also, they believes
in making use of direct
selling as its core strategy in
order to approach its
targeted audience.
Tactical decisions Tour operator of TUI includes
surcharge pricing strategy as
its main pricing strategy. This
has been chosen by the tour
operator by analysing market
responses. Incorporation of
this strategy directly provides
support to the respective
tourism company in inflating
On the other hand, tour
operator of Cosmos prefers
to use online marketing, e-
booking, brochures etc. as
its marketing strategy
undertaken by them with
tactical decision. This is so
because, tour operator has
personally analysed that its

its sales performance as well
as profitability at marketplace.
competitor firms are using
this medium of promotion
for approaching targeted
customers and they are
getting effective responses
from their side (Naji-Azimi
and et. al., 2012). This have
directly influenced tour
operator of Cosmos to
adopt this strategy for
remaining competitive
within the same
marketplace.
An assessment of external factors that adversely affect strategic and tactical decisions and
recommend responses
External factors are mainly determined as those one which are available outside the firm
but still has their influence over businesses as well as activities. Some of the main external factor
that could place impact over strategic and tactical decisions taken by tour operator of TUI UK
are stated as below:
Currency fluctuation: It can be said that if any kind of change takes place in the currency
rate then tour of TUI UK have to mould their strategic as well as tactical decisions in order to
deal with the situation. Also, here main motive of tour operator is to develop best package that
could effectively serve customers in the same manner with minimal fluctuation in its pricing
(Ronen, Pliskin and Pass, 2012). In order to handle this in appropriate manner tour operator must
take advice from good finance manager who can develop strong budget for them. This would
directly help them out in managing their finance effectively.
Terrorism: Even though security structure of UK is very strong but if any sort of terrorism
activity takes place in UK then it might place influence over decision of TUI. This is so because
terrorist activity might create fear among tourist and they might not visit the places which have
been earlier attacked by terrorist. In order to deal with this, tour operator of TUI must initiate

social awareness campaign non which they should clearly show how effectively government of
UK and the respective company is making use of advance security system in order to serve
customers in better manner.
A critical evaluation of recent strategic and tactical decisions made by tour operators making
valid recommendations for improvements.
On the basis of above specified information, it can be said that tour operator of TUI
effectively makes range of decisions. These decisions are generally taken according to market
situation and changing preferences of the customers towards the industry. Recently, strategic
decision taken by tour operator is to offer equivalent discount to each of its customers in order to
maintain equality among them (Shyju and Lama, 2015). This decision has placed both the
positive and negative impact over the TUI performance. The positive influence associate was
that customers got attracted towards the tourism services as they feels that this promotes equality
and value each of its customers. Along with this, it can be further said that the negative
experience associated with the same is that the some of regular customers expects additional
discounts and special offers from companies’ side. This directly de-motivates them and also
influences their interest towards the other tourism company who offers additional discounts to
them with similar kind of services (Su and et. al., 2014). Thus, in order to deal with this, it is
important for tour operator to revise their holiday packages and formulate list of discounts
towards the customers on the basis relationship with the company from the past to present. They
can also develop some new packages for the loyal customers of company in order to retain them
towards the firm for longer period of time.
CONCLUSION
From the above specified report, it is comprehended that tourism sector is growing at
constant basis whose growth is ultimately providing support to the nation’s economy too. Along
with this, it has been analysed that there range of stages which are mainly followed by the tour
operators at the time of developing new product or holiday packages for its respective customers.
Also, it has been further analysed that tour operators also makes use of different distribution
methods like social media, press, brochures etc. in order to enhance awareness of its customers
about their respective offering and new launches. Moreover, it has also been seen that tour
operators have to various decisions in their profession no matter they work for which company.

These decisions can be easily bifurcated into two sections that is tactical decision making and
strategic decisions making. Both kinds of decisions are generally taken on the basis of market
responses, competition within the industry, changing expectation of customers towards the
services which are used by them during their travel etc.

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