Tour Operator Management and Pricing Strategies

The report summarizes how Professional Universal (PUI) has an effective tour operation management system that improves efficiency. The recent developments in the tourism industry have positively affected PUI operations. The tour operator employs different distribution channels to sell holidays effectively, making it a cost-effective company and building competitive advantage over others in the tourism industry.

TOUR OPERATION
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
A. Analysing the current and recent trends and development in the tour operator industry.......4
TASK 2 ...........................................................................................................................................5
A. Different stages in the development of a package and preparation of a package by TUI......5
B. Evaluating various methods of contracting for different components of package for
different types of tour operators..................................................................................................7
C. Determining the selling price of holiday package .................................................................8
TASK 3..........................................................................................................................................10
A. Designing and planning a brochure and evaluating the process of decision making in
planning and the suitability of non traditional methods of communication and promotion for
different types of tour operators................................................................................................10
B. Evaluating and analysing different methods of distribution to sell the TUI holiday package:
...................................................................................................................................................11
TASK 4 .........................................................................................................................................12
A. Evaluating different strategic decisions of TUI...................................................................12
B Comparison of tactical decision in different situations by TUI............................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

INTRODUCTION
The tour operation management is concerned with planning and organising all the inputs
related to tour by purchasing it from several suppliers and preparing a package according to
travellers needs and specifications by adding all cost of inputs plus its own price. TUI a U.K.
based travel operator engaged in holiday packaging, charter and passenger airlines bookings,
booking hotels and resorts. The current report will focus on trends and developments in tour
operators industry, different stages while preparing a holiday package. The report will also lay its
emphasis on calculating the selling price for the holiday package, different types of distribution
channels for promoting the package (Cetin and Yarcan, 2017).
TASK 1
A. Analysing the current and recent trends and development in the tour operator industry
The tour operations industry has witnessed drastic changes in the recent years and many
developments has taken place since the industry is prone to specific customers' requirement. TUI
has adapted itself according to the ever changing environment efficiently which is the reason that
it is one of the successful tour operator of U.K. The recent development are given below:
Budapest, Hungary one of the most popular holiday destination is famous ancient castles, old
towns with rich cultural and historic buildings are the attractions of the city. People nowadays
tends to explore the ancient places and the Budapest serves as the perfect destination for such
kind of travellers.
 Technology advancement: Development in the technology has positively affected TUI
as it has widened the scope of its services to the large customers base. Sophisticated
software for tour operation management has helped the company to manage large
database and determining accurate price of their products. Trend of providing all its
products through mobile apps has made it easier for the operator to directly interact with
the customers which has helped them in better understanding of customers requirements.
Touists uses the technology to find about the places in Budapest and its attraction sites
for their holiday purpose.(Chanin and et.al., 2015).
 Effect of Brexit : Brexit has affect tourism industry positively. The tour operator has it
sales increased in the domestic market as the number of customers in the year 2016

increased by 71 percent. Domestic holidaying in Budapest, Europe is becoming more
popular in the country in the time Brexit has boomed the domestic business for TUI.
 Inflation: This economic factor has affected the tour and travel business of TUI because
rise in inflation has made everything expensive in the country and this has decreased the
living standard of the people in Europe and their purchasing power has also reduced, the
result of which is decrease of number of customers for the tour operator.
 Low cost carriers: Low cost barriers encourage people to buy holiday packages as this
reduces the cost of travelling for them. TUI provide many such package in which it offers
very low rates of tickets to its customers for holidaying in the Budapest, Hungary. Low
cost carrier has played a crucial role in the development of the tourism in U.K. as tourists
are the most important source of bringing foreign money into the country(Ndope, 2015).
TASK 2
A. Different stages in the development of a package and preparation of a package by TUI
For developing a package for the customers, TUI goes through various stages which are
given bellow:

Market research: TUI conducts detailed research about the various components that are to be
included in the package like from where to buy the different inputs, list of different suppliers,
customers preferences, recent trends in the industry, its completion's position in the market and
its products offerings.
Planning and fixing the schedule: The second is planing of the package is done by TUI like
identifying the suitable hotels, resorts for the customers, exotic locations in the destination,
transport availability in that area and fixing the dates with them.
Contracting:After planning part is over, execution part starts. TUI starts negotiating with the
different suppliers such as the hotels and resorts management which are to be included in the
package and every alternative is analysed carefully and most cost effective supplier is chosen by
the TUI.
Determining the cost of holiday: When the supplier of the package's components are fixed by
TUI then costing of the package is done. Each input's cost is determined by the tour operator.
Illustration 1: Travel and tourism
Source : (Itinerary Budapest)

11 Pricing of the package:When costing is over then TUI decides its profit margin which it
desires to earn on the sale of its products. The tour operator fixes its profit margin along
with the actual cost of package they are buying from different hotels, resorts and
transport agencies. This the final price that they offer it to their customers(Szeto, 2014.).11 Developing brochure: Brochure is template or an attractive booklet that shows various
pictures of the destinations, information about the place, products and services, various
interesting facts are included in it to increase the excitement of the customers. Preparing a
brochure will be the advertising tool for the tour operator.11 Advertisement: This is done by using social media like Facebook, Instagram or print
media like magazines, distributing brochures through travel agents in exchange of some
commission.11 Executing the package: When the package is purchased by the customers then TUI part
of performing its obligations occurs and it provides customers the experience for which
the customers has paid for.11 Post tour management: This is the last stage in the development of a holiday package.
The tour operator takes feedbacks of the products and services it provided to its
customers and take those feedbacks seriously to continuously evolve in the tourism
industry.
B. Evaluating various methods of contracting for different components of package for
different types of tour operators
TUI being a tour operator has to make contracts with its customers, its input suppliers, its
managers and travel agents. There are different types of contract that exist in the tourism and
hospitality industry which are given below:
 Fixed contract: TUI when developing a holiday packages for its customers comes into
contract with the supplier of the components such transport agencies, hotels, resorts, site
seeing agents. The amount of consideration is fixed in advance by the tour operator
before taking its customers to ultimate destinations. The tour operator is legally bound to
perform its part with supplier by paying the consideration for its products and services,

likewise the tour operator is bound to fulfil all the obligations which were promised in the
brochure at the time of selling its holiday package().
 Ad hoc contract: Ad hoc contracts for the tour operator are those in which the operators
arranges the extra facilities like accommodations, custom made services imposed by the
customers. Ad hoc contracts are common these days TUI to attain the utmost customer
satisfaction. For example inbound and outbound tour operators usually add this contract
along with their fixed contract as they deal with the international tourists coming into or
taking their citizen out of the country. This increases the tendencies of travellers to ask
for additional services for which the tour operators include this type of contracts
(Tactical Marketing Tools, 2018).
 Allocation contracts: These contracts helps TUI to bag discounts from the components
suppliers which vary according to company's size, seasonality, locality of the hotels. This
contract involve tour operator to make booking of hotels or seats of certain number that
estimates the sales size, and allows it to exercise its right on a particular date given in the
contract. The input supplier becomes risk free in respect of its products being unsold and
allows tour operator huge discounts which makes them competitive in the market.
C. Determining the selling price of holiday package
Fixing a selling price of a holiday package involve various factors such as cost of inputs,
competitive pricing, discounts, profits margins of TUI. The factors are given below:
 Fixed and Variable cost: Fixed cost for the tour operators includes those prices which
were preset at the time fixed contracts, those cost which have to be incurred irrespective
of the number of customers on holiday. Variable costs are those costs which vary with the
change in number of tourists like rooms are to be booked according to the number of
tourists, fewer tourists less room and hence less variable cost, difference in the price of
same products and services due to seasonality factor. Also, it includes the differential
prices from different providers of components of holiday package(5 tips to find the right
price for your tours and activities,2010).
 Direct and Indirect cost: Direct cost for TUI include all those cost which directly affect
the cost of package like tickets, room books. Indirect cost are those which indirectly

affects the cost of the TUI products and services like rent paid, distribution costs,
advertising and selling costs.
 Competitive pricing: In order to survive in the industry, it is very essential for TUI to
price it's competitively. The price should be such that it is affordable to the masses and
simultaneously capable of providing company the desired level of profits. Such pricing of
the products ensures a competitive strategy to be a successful operator in the market.
 Discounts: This factor is taken into consideration while determining the selling price of
the holiday package. Granting discount is a form of promotion of products which markets
the TUI products and the amount of the discount is decided by the tour operators by the
level of discounts it has been granted by the suppliers.
 Profits margins: This is the factor that company decides taking into consideration its
position in the market, level of competition, actual cost of the products and its operational
costs. The profit margin is added to the total cost of the package and this how TUI
determines its selling price.
All the direct and indirect costs whether fixed or variable costs are added up for arriving
the total cost in which the desired profit margin could be added for determining the final price of
the package. Lastly, the package price is divided by the total number of tourists in a particular
package and this price is quoted to the customers.
Marketing cost 250 Pound
Utility bills 100
Rent 150
Airline cost 800
Operational cost 500
cost 1800
mark up 15%
total selling price 2070
per person price (total 10 person) 207.0

TASK 3
A. Designing and planning a brochure and evaluating the process of decision making in
planning and the suitability of non traditional methods of communication and
promotion for different types of tour operators
Planning of brochure is dependent upon various factors such as cost of printing.
Identifying and evaluating each of the different supplier of brochure to find out the most
effective brochure producer, cost of designing a brochure and the most cost effective distribution
channel is determined, quality of printing of the brochure, number of copies are to made and
amount of wastage that could be generated are cost factors which are considered in planning
process of brochure(Shin and Byun, 2015).
Afterwards the decision regarding the format of the brochure is taken like what the
brochure should look like a template or like a booklet. Target audience and the amount of funds
require in the preparation of brochure are another factors that are considered in TUI's decision
making. Quality and designs of brochure determines the target audience and available funds in
the company determines the number and quality printing for the brochures. Printing specification
decision are also to be take while planning for the brochure of the TUI because brochure makes a
first impression on the customers regarding the company and also the package. Font sizes, styles
are all to be decided during designing the brochure of the company.
Seasonality of the proposed destinations, cost associated with such seasonality which will
be included in the brochure are considered(Szeto,2014). The last date is also decided for
preparing the brochure and making it available to the distributors for promoting and selling TUI's
products(5 tips to find the right price for your tours and activities,2010).
There are different methods of communicating the products' information to the customers
tourists which are discussed below:
 E- brochure: Tourists and the potential customers can be made aware of the TUI's
products and services through electronic media by sending brochures to customers
online. Internationally operating tour operator are benefited by e-brochure.
 Mobile applications: Extensive use of mobile and internet and people's dependency on
mobile apps have forced tour operator to provide the products' information through just
one click on mobile. This has let TUI covering masses across the globe and also it has

reduced its operational and distribution cost by removing the travelling agents in the form
of commission charged by the such agents. Inbound and outbound tour operators are
largely benefited by these media as they can sell their products to the customers across
the international boundaries and can purchase its inputs of the package.
 Social media: As more and more number of people are spending their time on social
media, this platform has given TUI a great opportunity of promoting its products through
the use of social media by creating their official account on the Facebook, twitter and
Instagram to let people know of TUI holiday package at the most affordable prices. This
method of promotion is suitable for all types of tour operators in the industry(Yadav and
et.al., 2017).
 Radio and TV advertising : This method of communication is suitable for large and
financially sound tour operators who are capable of incurring such huge promotions
activities. These media are generally for acquiring new target markets and for reaching
masses worldwide.
 Press and Newspapers: Almost types of tour operators whether domestic or
internationally operating company like TUI uses press media and newspapers for selling
its products. This method is relatively cheaper than TV advertising and is more
economical for the tour operators as it reduces their operating cost of marketing the
products which will allow them to offer a reasonable amount of discount to the customers
as compared to its rival operator. This all enhances the profitability, efficiency and image
of the TUI image in the tourism industry.
B. Evaluating and analysing different methods of distribution to sell the TUI holiday
package:
TUI uses different methods of distribution for selling its holiday packages, tickets
bookings ,
cruise packages which are stated below:
 Direct distribution : TUI directly sell its products through interacting with the customers
by itself without any mediator. The tour operator generally uses this method for

eliminating the cost of such mediators and where the customers specifications are to be
personally met by the company involving huge holiday money.
 Two level distribution: Two level distribution involves a mediator like travel agent who
provides services such as airline bookings, other transport facilities on behalf of main
tour operator involved in a package. They all work together to serve best to the
customers. These agents on commission basis sell TUI products to its customers.
 Through official website: TUI has its official websites through which tourists can
directly interact with the operator and can buy its holiday package from the TUI online
portal.
 Online travel agencies: Online travel agencies is another method of distribution for
selling the holiday package by TUI. The operator creates a fix contract with the these
travel agencies to sell its products through travel agency's online channel for accessing
the different markets.
TASK 4
A. Evaluating different strategic decisions of TUI
 Pricing strategies: TUI uses competitive pricing strategy for its products to provide most
economical holiday packages to the tourists and customers. They use cost control and
cost reduction tools for becoming cost effective tour operator in the industry. Cost
leadership strategy is used for selling its product at low price to gain maximum customer
satisfaction through efficient services.
 Surcharge policy: Tour operator follow surcharge policy of adding an extra amount in
the billing of the package and it is mentioned in the terms and conditions of the tour
operator's brochure.
 Positioning and brand image: TUI applies various techniques of positioning for making
TUI stand at better position in the market. Marketing team of TUI focuses on improving
the brand image of the company by catering to the needs and specifications of the
customers, serving the best deals which are more economical and affordable than its
rivals products(Three things that will make your tours more competitive,2018).

 Distribution strategy: Distribution strategy involve from where it will be economical for
the TUI to sell its products, which distribution channel will cover the masses or will hit
the cords of target audience to increase the sales.
B Comparison of tactical decision in different situations by TUI
TUI takes tactical decisions when it faces dynamic situations occurs in the market which
are not of permanent nature and are adopted for coping up with business environment and the
same are discussed below:
 Tactical Responses: Tactical decisions are taken by the tour operator to meet the
demand of the industry for shorter period. For example when TUI decides to cut the
prices of its products, its competitors will also cut the prices of their products in order to
give stiff competition in the industry. Similarly, when TUI raises its products price, its
leading competitors will follow the same because customers might think that if a
company is providing a holiday package at very low price compared to its rival, means
that it has compromise the quality of services and products.
 Tactical Pricing : TUI uses tactics to handle the price related pressure in the industry
like during the season, it raises the price the prices of its products to earn more profits and
decreases it prices at the routine time in the year. Example of pricing tactics would be
like quoting price 9999 rather than 10000.
 Tactical Marketing:Tactical marketing in the boom period proves beneficial for the tour
operator and it uses aggressive promotions and advertising tools to sell its products.
Tactical marketing helps in moulding the tour operators strategies which are of long term
and which cannot be change overnight. Tactical marketing tools include product tactics in
which more specifications can be added to lure the tourists. Other tactic is mentally
driven like quoting products' price at 9,999 pounds rather than 10,000 pounds.
CONCLUSION
From the above report, it has been summarized that PUI has an effective tour operation
management system which has improved the tour operator's efficiency in whole. The recent
developments in the tourism industry has positively affected the PUI operations. It was seen that
the tour operator employs different distribution channels of selling the holiday effectively to
become cost effective company and build a competitive advantage over others in the tourism

industry. The above reports also showed how applying of different strategies and tactics has
helped the operator to survive and be competitive in the market.

REFERENCES
books and journals
Cetin, G. and Yarcan, S., 2017. The professional relationship between tour guides and tour
operators. Scandinavian Journal of Hospitality and Tourism. 17(4). pp.345-357.
Chanin, O. and et.al., 2015. Guidelines on Halal tourism management in the Andaman Sea coast
of Thailand. Journal of Economics, Business and Management. 3(8). pp.791-794.
Ndope, K., 2015. The Effect of Global Environmental Turbulence on the Performance of Firms in
the Tourism Sector in Kenya: A Case Study of Tour Operators (Doctoral dissertation,
United States International University-Africa).
Shin, S. and Byun, B., 2015. Evaluation of Trail Facility and Operation-Management for Walking
Tour Revitalization-focus on Ganghwa Nadeul-gil. Journal of Wetlands Research. 17(2).
pp.176-183.
Szeto, W. Y., 2014. Dynamic modeling for intelligent transportation system applications. Journal
of Intelligent Transportation Systems. 18(4). pp.323-326.
Yadav, A. S. and et.al., 2017. Analysis of seven stages supply chain management in electronic
component inventory optimization for warehouse with economic load dispatch using
genetic algorithm. Selforganizology. 4(2). pp.18-29.
Online
5 tips to find the right price for your tours and activities.2010. [Online] Available through
<https://www.trekksoft.com/en/blog/pricing-your-tours>
Tactical Marketing Tools. 2018. [Online]. Available through
<https://smallbusiness.chron.com/tactical-marketing-tools-60573.html>
Three things that will make your tours more competitive.2018. [Online] Available through
<https://www.rezdy.com/blog/3-strategies-that-will-make-tour-operator-products-more-
competitive/>