This is a solution of HNC tour operations management in TT Assignment which discuss tour operators industry, stages involved in creating holidays, review brochures and methods of distribution used to sell holiday and more.
LO1. Understand the tour operators industry within the travel and tourism sector.
The tour operators are those who combine all the components of tours and travels to create a holiday and sell this to the customers in the form of packages. They make these packages by making contracts with the hotel operators, airlines, railways, other transport operators. They include all these things in a package where a customer will be provided a flight to travel to a tourist destination, they will be provided with a travel arrangement from the airport to a hotel and then services of the hotel and other local representative. They charge a single price for all these services as name this package as a holiday package. This trend of the holiday package is catching up pretty fast these days. Earlier it was very difficult for the tour and travel operators to make the arrangements for the customer in far off places and only specialized in niche markets but now with the advent of technology, better link between companies and more awareness, the travel and tourism industry is at a boon. Earlier the travel and tourism operators faced the problems of language, communication, currency, etc. but as the facilities are increasing, technology has advanced; all these problems have been solved very easily. Moreover, with the advent of internet, it has become possible for the tourists to for self-packaging of tours and holidays. The tour operators have the skills and competence to arrange these packages for those who do not want to put efforts of making the arrangement themselves. They make it less expensive for the customers to go for certain tourist destinations which would be much costlier if arranged by own separately. This is because the tours and travel operators have proper contracts with the hotels, travel operators, tourist operators which help them to provide these services at a lower price to their customers. The package details or the holiday details are included in the brochures they publish which they distribute to the customers directly or with the help of travel agents (Ingram, 1989).
Let us see the top tour operator in the main 5 regions of the world. This can be based on the number of trips they have offered and their diversity. In the US and the Canada region, the leader is the Trafalgar Tours who have featured around 69 tours in the US, Canada and Mexico. These tours include almost all the major destinations in these countries. The price also ranges from high to low where the minimum price is $1000 per person. One of the famous tours offered by them is the “Canada Rockies” tour. The other includes the Globus, Maupintour and Collette Vacations. In the Europe region also the leader is the Trafalgar tours. The number of tours also touches a magical number of 335 which include all varieties of tours ranging from lower end tours of sightseeing by bus to expensive trips which included trips to more than 1 country. The common tour is the Grand European tour which included tour of 10 nations where the starting charge was around $3.6K. The other operator in Europe in cruise lines is Tauck World Discovery. In the Latin America region, the popular tour operators are Go South Adventures and the Latour, Travcoa, and Abercrombie and Kent. All these have different specializations like Go South Adventures specialize in the tours including small groups. Latour offer holiday packages to more than 16 countries. Travacoa is a tour operator offering luxury tour services. Abercrombie and Kent provide high end holiday packages. In Asia, Pacific Delight Tours is the leader in this segment. They also provide the packages in various price ranges. The other players in this market are Gate 1 Travel and General Tours. The Gate 1 Travel offer independent and guided tours both. The General Tours deals with packages in all the major Asian countries. In African region, the African Travel Inc. is a clear leader in the tourism operator industry. The tours they provide are basically of two types: Safaris and Dreamscapes. The Safaris are very frequent and are packaged deals. Dreamscapes are of shorter duration and include full vacations. One of the most famous tours offered is the Lion World Tours. Another example is Pacific Delight World Tours. There are basically 4 types of tour operators which are inbound, outbound, ground and domestic operators (Ioannides, 1992).
Inbound Operators: Inbound operators are those operators who are directly serving the foreign tourists they provide them all the services from their arrival till their departure. These services include travelling, accommodation, currency exchange, insurance, tourist destination sightseeing, entertainment, insurance, etc.
Outbound operators: These tour operators are those operators who specialize in creating holiday packages for the people of their own country to other foreign destinations. They specialize in developing and promoting multi- national tours to foreign destinations. The outbound tour operator helps in arranging the necessary documents for the local tourists to go on foreign trip, provide a transportation service to them to the location from where the tour has to start and sign a contract with the inbound tour operator of the foreign destinations. Through this contract they provide their customers various services like transportation, accommodation, sightseeing, etc.
Domestic Tour operators: In the current scenario, as the travel and tourism industry is growing at an alarming rate, the competition has become fierce as more and more players have entered this market. Most of the players who are leading in this business mostly focus on international tours but this has changed now. These days they are also focusing on the capturing the great potential of the domestic destinations. These operators are those who provide the services for vising and enjoying the domestic tourist destinations.
Ground Operators: They are also known as reception operators or handling agencies or destination management companies. They are basically those companies who provide the arrangements at a particular destination. These operators come in use for the large tour operators for destinations where they do not have presence or do not have direct contract with the supplier of services like hotel, travel for that particular destination.
LO2. To understand stages involved in creating holidays
P2.1. Access the stages and timescale involved in developing holidays
There are basically twelve stages involved in the development of holidays. These twelve stages can be describes as below:
- Research: The first step for the development of holiday is doing research. This includes extensive research on the tourist destinations and the market. This stage includes research to include key elements of a particular destination and market. Basically the tour operator do some primary research on the economic, social, political and climatic conditions of the tourist destinations and marketing planning to include in their holiday package. Then the research includes the needs of the customers they are targeting in various parts of their holiday package (Poon, 1993). They also have to research as to what shall be added in the holiday packages to make it satisfactory for their customers. They study the key destinations and alternatives to these destinations. They need to do a research on the suppliers of the services included in the holiday package such as the hotels, travel agencies, ground operators, etc. For the wedding package and the Walking tour this will take more time as what they are offering is unique.
- Development of the Tour Itinerary: Once the research is complete the next step in this process is to develop an effective tour itinerary. It is based on 2 things: New entrants in this industry research on destination and the constituents of the holiday package whereas the established tour operators have to study the feedback of existing customers.An itinerary contains the summary of the tour programs, the origin points, destinations, and route details, details of the accommodation, travel, sightseeing and other services. It also consists of the sequence of the tour constituents and provides other necessary details like schedule of visiting various destinations, legal requirements, tour duration, features of the tourist destinations, activities included, food provided, etc.There are 2 steps followed here to itinerary development. The first one involves, approaching the unknown vendors. The second approach includes tour planner making contract with all potential suppliers in advance to put in all the constituents of the holiday package. Similarly for the case study for the wedding package and the Walking Tours, the applies and the tour itinerary will contacting all the events that will happen in the wedding tour and the walking tour, their timings, etc.
- Negotiations with the Suppliers and the Vendors: once the itinerary is completed and the vendors and the suppliers have been identified, the tour operators need to negotiate on the services provided by the suppliers and the price of those services. The tour operator comes in contract with different supplier of different size and nature depending in the requirements of the tour. After the negotiations are done many of them get them documented in a contract which also include the penalties if the contract is not followed i.e. if the services agreed are not provided, then the vendors have to pay some penalty as mentioned in the agreement. This can be used to ensure the performance of the vendors and suppliers in the holiday package. The wedding tour has to negotiate with the helicopter industry for example.
- Determining the cost of the holiday package:The tour operator has to determine the cost involved in developing the package and implementing it. This is really important for the operator to understand the various costs involved in the package so that the ingredients can be changed accordingly if required. This is also very important component for determining the price to be charged to the customers and for profit calculations. The cost can be determined depending on the client requirements and the organizational strategies. This total cost can be broken down to cost of individual components like air accommodation cost, airlines travel cost, ground operators’ cost, local arrangements cost, the cost of the salaries of the employees of the tour operator company, cost of research, marketing, promotion and miscellaneous costs.
- Pricing of the package: After the cost has been determined of the package, the next step would be to determine the price of the package. This depends on the method of fixing the price followed by the tour operators. The most common method used by most of the operators is the cost of the total package plus the profit to be earned. This method is very effective for the new entrant in the tourism industry but not for the well-established tour operators. Also while fixing the price of the holiday package the tour operator must keep in mind various other factors like price competitiveness, government policies, nature of tour ingredients, exchange rate fluctuations, inflation, target market segment, so on and so forth.
- Administrative staff: Business environment for the tour and tourism require extra human resources to meet the increasing seasonal needs. The tour operators should be clear in mind about the work they are going to assign the extra resources like doing the extra activities at the destinations, resorts, etc. They hire people for these jobs who are trustworthy and capable enough to meet the requirements of the work to be done.
- Marketing a Tour Package: After the package is ready, it needs to be marketed. It plays one of them most important roles in driving tourists to a particular tourist destination. The tour marketing is a very complex process which involves strategies to identify the demands of the customers and service which will satisfy the customers with the services provided. It has to develop strategies to make it a happy experience for the customers to plan, prepare and experience their holiday.
- Marketing Planning : It is basically a short term plan which helps the tour operators for one to three years in coordinating the resources of the tour company to achieve the set goals. The marketing plan should be developed in such a fashion that all its components fit together easily and the plan can be executed effectively under the budget.
- Marketing inbound and inbound tours: Depending upon the type of tour, inbound or outbound, different marketing plans are developed to cater to these tours. The conditions for inbound and outbound tour are different and hence the marketing strategies are different.
- Brochures: Brochures play a very important role in the marketing of the holiday packages. They contain all the details of the tour and help the customers to make decisions. These brochures are then distributed to the customers via different channels like direct selling, hiring agencies to distribute the brochures, using call centres, internet, teletext, telephone, etc.
- Operations management and Execution: The success of the tour depends on the fact that how efficiently all the plans have been executed. This is phase where what has been promised in the brochures, package deals have been actually provided and services rendered to the customers and satisfy them. If all the sections of the tour are managed properly then whatever is expected from the company can be fulfilled in a very efficient manner. The performance of the tour operator is measured in this phase.
- Post Tour Evaluation: This phase involves the process of creating several reports which will give important feedback on the performance of the company and helps in comparative analysis.
P2.2 Evaluate the suitability of different methods of contracting for different components of the holiday and different type of tour operators.
There are different methods of contracting for different components of the holiday. The number of components depends on the nature and size of the tour. The main components include the airlines, hotels, transport operators, ground operators, car rentals, ground operators, sightseeing operators, etc. (Coltman, 1989).
The tour operator can directly get into a contract with the airline or indirectly by linking up with the travel agency. If the tour operator has a strong history with the airlines, then they can get into a contract with more negotiation power as compared to those who deal with the travel agencies. On the other hand for those operators who are new entrants in this industry, it is better to get into a contract with the travel agencies as they will get better price. The travel agencies can provide lower prices depending on the client relations. The travel agencies buy more seats than the tour operators as they are working with different air tours and have the stand to negotiate future tour prices. The contracts depend on the desperation of the airlines to fill their seats.
Hotel contracts are signed with a penalty clause that if the services promised by the hotel operator are not fulfilled then they can be sued by the tour operator. In these contracts all the expected services form the hotel company is described in detail.
The tour operator also gets in a contract with the ground operators, local transport operators, restaurants, insurance companies, banks, cruise companies, sightseeing vendors, etc. the ground operators or the local operators include all other services in its umbrella. The contract depends on the size of activities they perform and the number of tourists they handle each year. The reliability of the different components of the holiday should also be considered while preparing these contracts by including the penalty clause for not performing to the levels expected as in the contract.
P2.3. Calculate the selling price of a holiday from given information
The selling price is calculated by first estimating the cost of the package tour. After the cost has been determined, the tour operator considers the exchange rates, estimates the selling price in the future and then finalizes the price of the holiday. So we see here that before the final price has been determined for the holiday package, the tour operator must consider the financial risks. These financial risks include the exchange rates, payment for the airlines, hotels and other local agencies of the tourist destination. The holiday price is not determined by solely determining the cost of the holiday but also the expected goals such as Market share, rate of return and the competition of price among the various tour operators. The pricing of the holidays is a very complex procedure as it depends on the factors like degree and intensity of linkages, the things included in the holiday package, the competitive behaviour of the tourism industry and the demand of the tourism.
There are also some other external factors that control the price of holidays. These are government policies, climate, terrorism, competitive prices, exchange rate fluctuations, market segments, etc. So there is no single approach to fix the price of the holiday packages in the tourism operator industry and this approach varies from one tour operator to another. In the year 1993, James Poynter developed a method for fixing the price of a holiday package and described the various steps involved in the process. He followed a simple process in which the price was determined was adding a projected profit to the total cost. In the first place, the manager of the Tour costing and Pricing department, calculates the per pax break even tour price by dividing the number of customers for breakeven and compare the breakeven tour price per person to the budgeted projection per person tour price. This method proves to be very beneficial for the new entrants in the tour operator industry but not for the well-established operators. This is not beneficial as the suppliers and the competitive environment of the industry force the operators to reduce their profit margins. In the year 1992, Holloway proposed that the specialist tour operators have more flexibility to fix their price for holiday packages because of the uniqueness of their product and may use this process of cost plus profit where they also consider the competitive prices of their competitors (Dann, 1988).
Most of the tour operators recover the costs by calculating per capita contribution by estimating costs and number of tourists for the year. For the case of specialist tour operators, prices are determined by considering the market demand at different timeframes.
LO3. Be able to review brochures and methods of distribution used to sell holidays.
P.3.1. Evaluate the planning decisions taken for the design of selected brochure
One of the most important marketing tools of the tour operator company is its brochure. The brochure contains the comprehensive information about all the details of the holiday package containing all the explicit information required. The brochures are used by the tour operators to persuade and encourage the holiday makers to buy the holiday packages provided by them (Buck, 1997).
In the year 1988, Middleton suggested that the most of the marketing of the tour operator packages depends on the brochures as compared to other marketing activities for the customer. At the time of sale the holiday package is no more than an idea but the brochures present the holiday details in an elaborated manner. The brochure made by the tour operators defines the quality of services to be provided, the value for the money that is asked for, thee image and status of the product in the market. Some of the important information that should be included in the brochures of the tour operators is:
- Name of the tour operator company
- The transport mode to be used along with their details like carrier name, type of aircraft and the charter/ scheduled service
- The details of the tourist destinations, itinerary and the travel time to reach there.
- Tine duration of stay at all the tourist destinations in terms of days and nights.
- Description of the tourist destinations
- The type pf accommodation and meals to be provided
- The details of the services of the ground operators
- The price to be charges for the entire package.
- This should also include the extra charges if charged for any reason
- It should contain the details of the special arrangements and facilities
- The terms and condition of booking as well as cancellation details
- It should also contain of all the insurance terms which may be optional or compulsory depending on the holiday package
- It should also contain the list of documentations required for travelling to the mentioned holiday destinations.
- It should also mention the health threats and the inoculation recommended.
The brochures basically are divided into sections and sub sections. Its cover page is expected to contain the holiday name, date and theme of the holiday, the tour id and the name of the tour operator company. Inside the brochure, there should be the details of the tour features, a brief itinerary, types of accommodation to be provided, modes of transport that is going to be used, payment details, the specialty of the tourist destinations, payment conditions, insurance details, currency, documents required, internet addresses, websites, and also a self-mail page for the registration of the tourists (Sheldon, 1986).
But there are a lot of decisions to be made in the making of these brochures. These include the decisions on the format of the brochure in terms of the content of the brochure, the structure, style, the quality of paper used and the size of the brochure. These Business decisions are made based on different factors like the products offered, target market of the company to which the brochure is aimed at and the budget of the company. Other decisions to be made are determining the print specifications, the print run, and number of editions to be published, timescales and production stages, brochure launch, legal compliance. They also have to decide whether they will be using other formats for their brochure other than the hard copy such as CDs, videos, on internet, intranet, television, etc. (Dilley, 1986).
P.3.2. Access the suitability of alternatives to a traditional brochure for different type of tour operator.
Apart from the traditional brochures there are other alternatives which are used by the tour operator companies to market their products and services. These alternatives include various promotional programs to market the holiday packages such as sales promotion, direct selling, advertising campaigns, etc. Also the use of traditional brochures is on a decline and the websites are taking their place. The most common replacement of the traditional brochures is the websites of the tour operator companies. Some of these can be explained as follows:
Online brochures: As most of the companies are going tech savvy, the tour operators also make the best use the potential of the internet to publish soft copies of their brochures on the website and make them available to the customer. They can also mail the periodic special offers to their customers and offer discounts to maintain relation with their existing customers. They can also put this online brochure on the most commonly used tour and travel websites. They can use the website of their supplier for capturing wider audience.
Video and virtual brochures: This contains the details of the holiday packages provided by the tour operators in the form of video. This can also be used for promotional advertisements. With more and more use of the social media, the tour operators are using these social media to post their videos to capture a lot of attention and pull huge number of customers. The operators also encourage their customers to share these videos on the internet.
If we take the example of Thomas Cook, they can also make the most use of it and they are actually making use of some of the modern methods of brochures distribution and other kinds of brochures. They can be really very effective way of reaching out to the customers of Thomas Cook.
P.3.3 Evaluate the suitability of different methods of distribution used to sell a holiday for different types of tour operator
After the brochures are made, different type of tour operators use different type of distribution methods to distribute their brochures to the customers. These methods varies from direct selling, hiring agencies to distribute the brochures, using call centres, internet, teletext, telephone, etc. The large tour operator companies in the countries like United States of America, India, United Kingdom, Germany, Japan, France, etc. print more than thousands of their brochures and distribute them through retails travel agencies, ground operators and other retail outlets (Buhalis, 2001).
Some of the tour operators send their brochures directly to their customers who have used their services in the past and to those who are potential customers who are identified by market researches. These include the corporate houses.
They sometimes also hire agencies for distributing their brochures like the ground operators who have direct link to the customers of a particular region. They can also use call centres for this purpose. The call centres distribute the brochures over telephone. Nowadays with the advent of technology and the increasing number of people using internet, most of the tour operators put the soft copy of their brochures ion their websites and make them available to be downloaded by the customers to make their decision (Higgins, 1996).
The tour operators also have to keep in mind the wastage of the brochures as half of the hard copy brochures are thrown away without being read by anyone. This wastage can be controlled by establishing accurate norms and standards. So, before the brochures are distributed, the sales managers are required to categorize their sales agents and clients.
Up to the case study of Thomas Cook, it can be said that the most effective way would be online brochures distribution. This is one of the most effective way to do that. Currently they are still using the traditional brochure distribution system via third parties.
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LO4. To understand strategic and tactical decision making for tour operators
P.4.1. Evaluate the tactical decisions made by different type of tour operator
As we have discussed in the sections above the tour operators have to take tactical decision at each and every step of their business. These varies from deciding the pricing strategies, defining the surcharge policies, positioning of their brand and building a strong brand name, choice of various constituent of the holiday package depending on the needs and preferences of the target market customers. Then it also includes the suppliers to be chosen for each component depending on the supplier relations, quality and type of services they are offering, price they are charging for them, etc. They also have to make a lot of decision while designing their brochures and how will they distribute their brochures, decision making for the investments to be made. There is also a lot of tactical decision to be made by the company depending on the competition, price competitiveness, marketing decision like season sales, discounts, maximum utilization of resources, maximizing yield, etc.