Tour Operator Industry Report: Trends, Strategies, and Decision Making

This report provides a detailed analysis of the tour operator industry, examining its operations within the travel and tourism sector. It explores current trends such as e-commerce, increasing spending power, niche tourism, and customized holiday packages. The report delves into the stages of holiday development, including planning, research, negotiation, and tour package creation, with specific examples of wedding packages in Las Vegas and walking tours in VIA ALGARVIANA. It evaluates different contracting methods, comparing fixed contracts and sale-only contracts used by tour operators like Airtours and Flightcentre. Furthermore, the report assesses strategic and tactical decision-making processes, considering factors such as market research, PESTEL factors, customer satisfaction, and the role of government and other organizations, concluding with an overview of the industry's economic significance.

Table of Contents
Introduction.................................................................................................................................................1
Task-1..........................................................................................................................................................2
P1.1- Analyse the effects of current and recent trends and developments on the tour operators
industry....................................................................................................................................................3
Task-2..........................................................................................................................................................7
P2.1 Assess the stages and timescales involved in developing holidays..................................................7
P2.2 Evaluate the suitability of different methods of contracting for different components of the
holiday and different types of tour operator...........................................................................................8
P2.3 Calculate the selling price of a holiday from given information below..........................................10
Task-3........................................................................................................................................................11
P3.1Evaluate the planning decisions taken for the design of a selected brochure................................11
P3.3 Evaluate the suitability of different methods of distribution used to sell a holiday for different
types of tour operator within the THOMAS COOK group......................................................................13
Task-4........................................................................................................................................................14
P4.1 Evaluate the strategic decisions made by different types of tour operator.................................14
P4.2 Compare the tactical decisions that could be taken by a selected tour operator in different
situations...............................................................................................................................................16
Conclusion.................................................................................................................................................17
References.................................................................................................................................................18

Introduction
Tour operator managers are considered as a vital part of the overall chain of the tourism
industry worldwide where in the major role of tour operators would be to arrange the
various services as a complete package for the consumers so that they do not have to
go to service providers for these services. These are the agencies which would arrange
for accommodation, transportation and other facilities for the consumers. This would
help in arranging all the services for tourist under one umbrella while cost reduction
would also be another objective for having tour operators as a part of the overall supply
chain in the travel & tourism industry.
The aim of present paper would be to discuss regarding tour operators and their
operations in the tourism industry (Syratt, 2003). Present paper would explore the below
mentioned four objectives so as to enhance knowledge of tour operator management
area:
P1 Understand the tour operators industry within the travel and tourism sector:
P2 Understand stages involved in creating holidays
P3 Be able to review brochures and methods of distribution used to sell holidays
P4 Understand strategic and tactical decision making for tour operators
Hence with the help of above mentioned four learning objectives and task defined in the
present context industry information and current trends prevailing in tour operator
industry would be explored. Stages involved in the tour operator industry would be
explored so as to understand the role of tour operators at each stage of the tour
package design. Brochure design and distribution method used by tour operators would
be explored to understand the importance which is placed in brochure by tour operators.
Finally, strategic and tactical decision making involved in the tour operator industry
would be understood.
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Task-1
LO 1 Understand the tour operators industry within the travel and tourism sector:
P1.1- Analyse the effects of current and recent trends and developments on the
tour operators industry
According to World Trade Organization (WTO) travel & tourism industry is one of the
major economic drivers not only for the developing countries but for developed
countries like UK as well. Looking into the UK scenario it can be found out that standard
growth rate in tourism sector is 4% which is much better as compared to the growth
observed in other sectors such as manufacturing, telecommunication and consumer
goods etc. Some of the key trends and development in the travel and tourism sector can
be given as under:
 E-commerce technology: E-commerce can be considered as the enabling
element for the current age tourism industry development. E-commerce has
helped the tour operators worldwide to attract consumers by imparting relevant
information through online medium (Swarbrooke, 1999). Further the online
booking and reservation system has allowed the consumers around the world to
book tour packages online without facing distance issue. In UK only there is
growth of more than 1.9% in year 2008 for the number of tourists who have
travelled from domestic as well as international destinations in order to visit
tourism destinations in UK.
 Increasing spending power: Increasing spending power for the consumers
towards the leisure activities has transformed the entire tourism industry wherein
consumers are spending a big portion of their annual income towards travel and
tourism. Increasing spending power for consumers has enhanced the
opportunities for tour operators dealing in UK market as this has become
lucrative industry. Further local people residing in nearby places to these tourism
destinations are also getting benefits from the consumer spending in these tourist
locations.
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 Niche tourism segment: Unlike traditional segmentation methods in tourism
sector in present time there are high number of niche target segment which are
shaping the entire tourism industry. For example, newly married couple is one of
the key tourist segments for the tour operators in present age and tour operators
are having high focus towards this segment as this segment provides high
opportunity for growth and big spending in terms of total amount spent on the
tourism activities.
 Customized holiday packages: Tour operator industry has high flexibility so as to
allow consumers to take benefit of the customized holiday packages. Consumers
are able to design their tour package as per their preferences so that they can
get maximum benefits through tour packages and this would allow high customer
satisfaction for the tour operators dealing in industry (Johnson, Scholes, and
Whittington,2008).
 Changing demographic pattern: Changing demographic pattern for the
consumers in tourism industry have opened new opportunities for the tour
operators wherein depending upon the demographic conditions of the consumers
tour package are designed. In the current scenario consumers prefer to go in
nucleus families or with their friends.
 Market research: Market research conducted by tour operators in the travel and
tourism industry has helped to identify the consumer demands and way out in
order to meet these demands so that consumers get high level of customer
satisfaction with the services offered by tour operators in tourism industry.
 PESTEL factors: PESTEL factors are shaping the travel and tourism industry
wherein factors such as the political, technological and economic are among the
most vital factors affecting the overall industry. Tourism destinations with poor
political stability would not be considered by consumers for spending their
holiday. Economic factors such as inflation, currency prices are also affecting the
overall choice of tourists to visit a particular place. Technology is enabling the
tourists as well as tour operators to interact with each other despite of long
physical distance.
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 Focus on customer satisfaction: In the present age tourism industry there is high
focus on creating consumer experience rather than just offering particular
services to the consumers. The main aim of services offered by tour operators
would be to create a happy experience through these services so that consumers
can come back to the same tour operator for availing service next time. Since
there is stiff competition prevailing in the industry so it is important for the tour
operators to enhance customer satisfaction level in order to develop a loyal
customer base so that they gain competitive advantage and maintain their
consumer share unaffected from the competition prevailing in the marketplace.
 Role of government and other organizations: With increasing role of travel and
tourism industry government has given high support in UK for enhancing tourism
activities by providing support in terms of flexible VISA policies, spending money
on tourism destination development and relaxing taxation norms for the tourism
activities (Holloway, 2002). There are several other private and government
organizations which are involved in the tourism activities so as to support the
local people residing in the nearby places to these tourism activities.
 Tourism marketing: Marketing activities followed in the tourism segment has
helped the tour operators and destination owner in order to create awareness
among consumers regarding their service offerings and attractiveness of a
particular tourism destination. Hence in present time information travels fast and
consumers would be able to know about various tourism destinations and the
particular sites located at these destinations.
 Focus on conservation: Present age tourism activities are not only focusing on
enhancing revenue through tourism segment but also there are many efforts in
order to conserve these tourism destinations so that they can maintain these
destinations for longer time period. Role of government and non-government
agencies is vital in conservation of tourism destinations so that local people can
have a regular source of income from these tourism destinations.
 Role in economy: Economic significance for the tourism activities is ever
increasing wherein tourism activities form a significant part of the overall
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economy or GDP in country (Streeter, 2012). Tourism has not only helped in
contributing to GDP but also to provide employment opportunities for the
stakeholders working in the tourism segment in UK.
Hence analysing the current situation in travel and tourism segment it can be said that
scenario is quite encouraging for the stakeholders working in the tourism industry.
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Task-2
P2. Understand stages involved in creating holidays
The present task involves developing the various stages involved in designing tour
package for 7 day wedding tour package in Las Vegas and walking tour in VIA
ALGARVIANA.
P2.1 Assess the stages and timescales involved in developing holidays
Planning is an important part of the overall tour development activity so that consumer
needs are completely included in the holiday package offered to them. Development of
wedding holiday package in Las Vegas and VIA ALGARVIANA is complex process and
it may take time of at least 12 months’ time. There are several issues faced in designing
of holiday packages such as fluctuations in currency and tax structure (Cooper,
Fletcher, Fyall, Gilbert and Wanhill, 2005). Below are some of the key stages involved in
the holiday development for Las Vegas and VIA ALGARVIANA:
 Examining the new destination: The two new destinations selected would be
examined for viability in terms of overall external environment pertaining in these
destinations, cost factor and tourism sites which would be included in the two
locations i.e. Las Vegas and VIA ALGARVIANA. The total time period defined for
the activity is of 2-3 months.
 Research: Consumer research would be done for the two selected destinations.
For example, in order to design the 7 day wedding tour package at Las Vegas,
the major activities for tourist would be researched such as wedding ceremony
through helicopter and other features offered to the tourists. Similarly for VIA
ALGARVIANA consumers would be explored for the possible tourism activities
required by them. The total research activity for the tour design would last for 2
months’ time.
 Negotiation: Negotiation would be done with the various service providers
in the two selected destinations for providing accommodation,
transportation, food and other facilities as desired by the tourists looking
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for the tour package in these destinations. Process of negotiation is quite
time consuming and would involve time period of 4-5 months.
 Tour development: The final step would be development of tour package by
negotiating with service provider and designing tour and communicating the tour
features to the tourists so that promotion can be done for the newly developed
tour package among consumers worldwide. This is the last stage and would
require 2 months time for the development of the tour development.
P2.2 Evaluate the suitability of different methods of contracting for different
components of the holiday and different types of tour operator
In order to book different components of the tour package designed by tour operator
managers mainly two methods are deployed which are sale only contract and fixed
contract. In present task two tour operators i.e. Airtours and Flightcentre would be
compared in order to make different types of contract for the services such as
accommodations, transportation and other services arranged by these tour operators.
The two methods for contracting used by these tour operators can be given as under:
 Fixed contract: Fixed contract are made by the service providers in order to
utilize the volume based capacity and at the time of off season so as to
maximize overall income for the service providers in tourism segment. From the
Airtours all inclusive summer package 2014, Airtours have made arrangement
through fixed contract where in based on the expectation for consumers Airtours
have booked the total capacity and payment would be done irrespective of the
capacity utilized. There is risk involved for the non-utilization of capacity and tour
operators would have to pay for the un-utilized part as well (Porter, 2004). But
Airtours has designed this package considering the fact that summer is peak
season for tourist to come for the holiday package and there are very less
chances for non-utilization of capacity hence fixed contract would come with the
added advantage of high discount.
 Sale only contract: Another tour operator company selected in present context
i.e. Flight centre would have made the sale only contract for their tour package of
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South America. This is the tour package which is designed in particular time and
for a niche consumer segment as due to highly expensive tour there would be
particular consumer segment which would be interested for such travel package.
In sale only contract Flight centre would pay the hotel owner and transportation
owners an amount for the capacity which has been utilized by their customers.
Such contracts are made at the time of lean season and in order to reduce
overall risk for the tour operator in case there is weak response for the particular
tour package designed by them.
Hence analysing the two contracting methods it can be said that fixed income contract
would offer several features for tour operators such as the high discount, ensuring
availability as contract has been made in advance and pre-decided level of profits for
the organization. Sale only contract for tour operators would allow them to reduce their
wastage of income as tour operators would not pay for the un-utilized capacity and they
would be able to minimize their risk.
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P2.3 Calculate the selling price of a holiday from given information below.
The selling price of a holiday would be:
Particulars
For one person
Amount
(Pounds)
For 80
persons
(Pounds)
Cost of a hotel per person for seven days 30*7 16800
Cost of supplement for half board per person 15*7 8400
Minimum amount to be paid to Thomas Cook
airlines 130 10400
cost of transfer from airport to hotels /person 35 2800
cost of local representative 15 1200
39600
Therefore, the cost for 80 persons is £39600 when Avra Beach Hotel is selected as an
option.
Cost per person to the company =£39600/80 =£495
The company decides to sell at a price of £650.
Profit percentage on selling price = 650-495 = 155
= (155/650)*100 = 23.84%
Thus profit percentage on selling price is 23.84%.
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Task-3
LO3 Be able to review brochures and methods of distribution used to sell
holidays
P3.1Evaluate the planning decisions taken for the design of a selected brochure
Brochure can be used in the tourism industry as a mean for providing information and
selling holiday packages through both online as well as offline method. In present task
planning decisions related with the Thomas Cook brochure would be explored. The
major advantage for distribution of brochure for tourism package would be low cost and
high reach (William, 2010). In order to design the present tour package brochure it is
important to undertake research and carry out planning, organizing and implementation
process. Below would be the major planning decision included in the present brochure
design process:
 Planning issue recognition: There are several issues which need to be
considered for planning decision pertaining to brochure such as target segment,
format, objectives for brochure and timescale in designing of brochure.
 Format: Format of the brochure should be pre-decided and format should match
with the target segment identified by the tour operators so that there is high
visibility and attractiveness for the brochure of tour operators.
 Target market and budget: Target market identified for Thomas Cook would be
based on the particular niche segment such as wedding tour or mass market
package. Budget would also be a key factor and depend upon the target
segment of company as this would show the spending power of consumers.
 Timescale and stages involved in brochure designed: Planning decision for the
brochure would include appropriate time under which entire brochure would be
designed and relevant stages which are included for the designing of brochure.
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P3.2 Assess the suitability of alternatives to a traditional brochure for the
following tour operators of the THOMAS COOK group: Air Tours, Summer
2014THOMAS Cook Cruises Summer 2014.
Present task would look into providing alternatives for the consumers in order to change
traditional brochure for Thomas Cook cruise summer 2014 and Air Tours summer 2014.
Providing alternatives for the traditional method would help in order to develop the
attractive brochure and higher consumers can be attracted towards the market offerings
of the organization. Traditional brochure has remained a popular medium for sharing
information but with increasing technology in present age it would be suitable for tour
operators that new ways can be developed. E-brochure offers effective medium for
development of brochure and providing information to the customers.
Brochure designed through online method by Airtours and Thomas Cook would be
helpful for these organizations as reach for these brochures would be much wider as
compared to the physical brochure used by the organizations. Another major benefit for
e-brochure would be the low cost medium as online brochures come in much lower cost
as compared to the physical brochure (Kelsey, 2014).Further overall cost required for
the development and design of online brochure would be less as compared to the
physical brochure designed. Visual medium can be one of the suitable alternatives for
these organizations as visual message has high impact and especially for the industries
such as tourism visual brochure would create high impact and would attract the
consumers towards the tour operator offerings.
Information as well as beauty of the tourism destination can be properly presented by
making use of the visual brochures and this would help in enhancing sales for the tour
package designed by the tour operators. Further such video brochure can also be
integrated effectively with the internet marketing tools used by the organizations for the
promotion of their e-brochure. Video brochure designed can be used for promotion
purpose by integrating it with the social media tools such as Facebook and social
sharing tool such as You Tube. Hence looking into the several aspects for the e-
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