This is a HND Hospitality Management Research Project Assignment in which we discuss research project and methods of research.
Old-fashioned travel brochures are losing their appeal, as Web-savvy holidaymakers demand more detailed, up-to-date information on packages and availability. E-brochures allow tour operators to deliver timely, customized content to travel agents and consumers-and should prompt a rethink of basic sales strategy. But the costs involved mean tour companies should adopt e-brochure technology one stage at a time, in close cooperation with agents and industry bodies. The first step in moving toward integrated demand planning is to understand the maturity of the current demand-planning functions. In many cases, companies believe that reorganizing current roles and responsibilities will deliver the benefits they seek. This is problematic because the new organization is often constrained by the same processes, systems and metrics that drove the need for the organization to change, which leads to significant frustration for the planning staff, as well as the merchants, tour operators and suppliers they are meant to coordinate. More advanced organizational structures designed to increase productivity and decrease cost can only be effective if the rest of the infrastructure is mature enough to support them.
Overview of the Study and Research Questions
Key research Questions are:
- How organization models are changing?
- Will the customer oriented strategy shape up future organisation?
- What is the particular customer engagement at retail level?
E-brochures will transform sales of package holidays
The printed brochure has driven the business model of tour operators for half a century. But the traditional brochure-based selling process is becoming obsolete, thanks to rapid changes in technology and rising consumer expectations. Retail travel agents are replacing rudimentary computer systems with fully-functioning PCs and Internet connectivity. Now sophisticated, tailor-made brochures can be delivered electronically to agency networks, or compiled and printed by agents in response to customer queries.
But e-brochures aren’t just about eliminating physical distribution. They allow travel agents to function as consultants giving customers up-to-the-minute information and help tour companies make use of enticing yield-quality management methods like dynamic packaging. Now operators have an opportunity to re-invent the sales process for package tours. This is vital for their survival in a market full of experienced travelers increasingly willing to build their own holidays. But cash-strapped tour operators can’t just “rip out and replace” traditional brochures. They will need to plan carefully, and deliver new e-brochure services in stages.
Importance of the Study
Organizations at Stage 1 of Sustainability maturity must seek to identify and move out of the "disconnected silo mentality" characteristic of this stage. This is often evidenced by a lack of communication, as well as a lack of alignment of goals and processes, which can be found between competing functions, departments, business units or channels. Centralized functions remove this temptation, allowing a focus on the science of forecasting, rather than the art of amending the output(Baumann, 2012).Over many years, operators have built an elaborate, expensive and centralized system for aggregating travel, accommodation and other holiday components, and marketing packages to consumers. The brochure has been key to this approach.
Traditional brochures have their virtues. They pack a lot of information into a very convenient form, which people can take away to read at their leisure. Glossy brochures are visually appealing and can help sell a broad range of products through effective branding. They are also widely distributed. What’s more, in a retail setting, the physical space that brochures occupy can help deny market share to rival operators. Many large tour companies have bought local travel agents to gain access to valuable shelf space.
But this brochure-based sales process has several drawbacks. Operators must agree content and set prices at least 12 months before people take their holidays. Yet market conditions can change quickly and often, depending on sometimes unpredictable factors like the weather, oil prices, exchange rates, the state of regional economies, geopolitical events, consumer confidence and fashion-led trends. Inevitably, setting prices so early means that some holidaymakers pay more than they should.
In Stage 2, demand planning becomes a defined, standardized function and recognized competency across all business units, departments and channels. Organizations develop standardized processes, systems and goals across existing planning groups. This includes rationalizing organizational structure, levels and position descriptions within each of these groups so that they are standard across the business, even if they report to different executives. This standardization brings a level of expertise in planning, as well as planning processes and systems, that is critical to the next phase.
Proposed time scale
Thomas Cook was made popular in the mid- to late-1990s, and is based on the business model of a system integrator. It's also referred to as a matrixed or pooled style of organization, because groups of like-skilled individuals are grouped together into resource pools (alternatively known as centers of excellence). To gain the full flexibility of the system integrator model, skills become the primary mode for assigning tasks.
In the system integrator model, relationship complexity is introduced, since no individual is responsible organizationally for all work done for an individual senior business executive. In nearly every case, project and maintenance work are segmented organizationally, and project teams are formed from the resource pools. Resource managers have administrative accountability for a group of individuals, but no work management accountability. Making the moving parts fit together is crucial in this style. Therefore, one or two new roles are critical to making the moving parts fit together:
- A relationship manager is responsible for managing the relationship between the application work done and a senior business executive.
- A portfolio manager is responsible for managing the work.
In Thomas Cook these roles are blended. In others, they exist separately. To ensure adherence to the prime directive, the accountability line of sight needs to be clearly established via reporting relationships for the duration of the work effort. A strong HR management capability is crucial, too, because at performance review time the resource manager must have evaluations to use in determining performance ratings.
Thomas Cook does not seek one right organizational model when it may not be there. In many organizations, the use of more than one main archetype may be necessary. This is particularly true for many of our largest, multinational clients. This is fine, as long as the trade-offs between the models are clearly understood, and the prime directive of managing the workflow in each archetype choice is made. Organizational design isn't a "one or the other" exercise, but rather a matter of matching the culture with the four pillars, then designing the workflow to take advantage of what is available — and where.
Price management is another headache
It’s not easy for tour operators to manage prices over time, because brochure content is fixed so far in advance of the holiday season. If prices need to be changed after publication, this can be done in several ways. Brochures can be reissued—some companies reprint up to four times a year. But this is expensive, and means a great deal of wastage. Some brochures carry separate price matrix supplements, which can be revised and reissued at lower cost than the full brochure. But the existence of several price lists for the same holidays can cause confusion for agents and their customers. Tour companies can also adjust prices by offering discounts through their various distribution channels. Repeated discounting over time erodes margins, however, and ultimately makes people less willing to pay full price.
Research methods deployed in this paper would be both secondary and primary research.
Results and Discussion
Here are some recommended actions for assessing the organization's current organizational and demand-planning maturity:
- Use Gartner's Sustainability assessment Toolkits to understand the level of maturity in your supply chain and demand-planning organization.
- Make sure that there are standard processes, systems and roles developed throughout existing demand-planning organizations before considering a move to the next stage.
- Focus on demand planning as a professional discipline, developing a high level of demand-planning expertise and an understanding of the end-to-end supply chain.
The second step in successful demand-planning initiatives is determining the ownership of the demand-planning process. The demand signal for tour operators typically falls into two categories — independent and dependent. Independent demand consists of the following:
- Shopper — This is the demand that shoppers place on a channel, typically at the item/location (or channel)/day level
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This demand stream is also influenced by promotional strategies, new product launches and seasonality.
Dependent demand is created by the response to the independent demand signal. Typically, this is done through an aggregation and transformation process that converts the item/location demand signal into a replenishment signal for the appropriate ship-from point. Dependent demand typically has two components(Baumann, 2012):
- Outbound — This is the demand that stores/channels place on ship-from points, typically at item/store/replenishment frequency. For more mature tour operators, this includes direct store delivery (DSD) products as well.
- Inbound — This is the demand that ship-from points place on suppliers (volume requirements from suppliers into a retailer's DC).
Research shows that, for many tour operators, ownership across these three activities remains fragmented. The supply chain typically owns the demand signal that is associated with inbound and outbound shipments from the DC (dependent), while merchandising owns the shopper demand signal.In many cases, companies believe that reorganizing current roles and responsibilities will deliver the benefits they seek. This is problematic because the new organization is often constrained by the same processes, systems and metrics that drove the need for the organization to change, which leads to significant frustration for the planning staff, as well as the merchants, tour operators and suppliers they are meant to coordinate.
One of the most common questions we get from our clients involves how to choose the right organizational structure. We seldom get that question from an organization that wants to stay in its current structure, so the real question is: "How can we justify changing our organizational structure?" In some cases, this is because a new senior executive has decided to reshape the organization into something he or she is comfortable with (for example, if the executive's heritage is consultancy, and he or she is more comfortable with a pooled organization style). In other organizations, there's a resource management issue (developers are constantly pulled from projects to do support work), or perhaps a project priority problem needs solving.
Travel agents need better IT systems
Whether or not the Web has changed shoppers’ expectations, the experience of buying a package holiday still leaves a lot to be desired. Most choices are based on price comparisons, because the combination of brochures and sales systems makes it difficult to search for and rank holidays according to other criteria, like proximity to the beach, local shopping, sports and childcare facilities.
The package tour industry lacks a strong IT-enabled sales process. It has database query tools, order-entry systems and marketing literature, but few formal processes to help sales staff match a customer’s individual requirements. The relative inexperience and high turnover of staff in large retail and call-center agencies make this problem worse.
The lack of sophistication in automating sales also undermines tour operators’ efforts to reduce distribution costs by driving customers to online channels. People are using the Web more but as an addition to, not a replacement for, printed brochures. It’s not easy to search the Web efficiently, and make a few choices from the thousands of possible holidays on offer, so people still pick up printed brochures as well.
In these organizations, changing the structure of the reporting relationships creates the illusion that something is being done. When a process is changed, or when new skill sets or roles are defined, this is not always easy to see by those outside the organization (or inside), but it's an illusion, nonetheless. When a magician performs the "saw the assistant in half" illusion, the audience knows the assistant isn't really being cut in half. In the same way, senior application leaders should understand that if they simply change the organizational structure, they create massive disruption that lasts from six to 18 months. It only appears that problems are being resolved. In reality, it's a double dose of pain; the problems are still there, and the organization has months of disruption to go through.
The basic rule should instead be similar to the physician's creed: First, do not change. However, for organizations that find they've reached the last resort in problem solving and must make a change to the organizational structure, there is a set of archetypes) they can use in the design. Each archetype has a set of associated variants, and each choice comes with a set of trade-offs, advantages and disadvantages. Any change to the structure must be accompanied by a full dose of organizational change management, including the alignment of incentives, marketing and communication (see the Recommended Reading section for research that can offer advice on building a critical competency in organizational change).
A road map for change
Limited cashflow and a recent run of poor financial results will make it hard for tour operators to reorganize their sales processes in a single move. Most will find it easiest to convert their technology and processes one step at a time. But there are five definite stages tour operators can plan for. Each stage should bring its own tangible benefits, and operators can go as far and as fast as they feel comfortable with.
Stage 1: Brochure digitization and on-site brochure printing. Most tour companies are just embarking on e-brochure production, though a number are already delivering electronic versions of printed brochures to agents as e-mail attachments or CDs. Some travel agents can also use on-site color printers to print brochure excerpts or versions available through secure Web sites. These methods are most useful for replacing out-of-stock brochures, or supplying specialist tour operators that have little control over shelf space in agencies. Large tour operators may need to offer subsidies to travel agents for professional printing equipment, but this could be funded from savings in brochure production and delivery. In one respect, shortages of printed brochures could also help travel agents, because customers would need to talk to them, rather than grabbing a brochure and leaving the premises.
Stage 2: On-site printing of e-brochures with real-time inventory and price updates. As e-brochure systems really take off, agents get access to tour companies’ content through secure Web sites. Brochure production moves beyond simple conversion of paper to electronic files. It can be dynamically linked with up-to-date destination and inventory details, and real- or near real-time pricing and availability. Agents can select what’s relevant for their customers, rather than printing a full brochure, and can make sure that what’s being shown is likely to be available. This will require improved content management, yield management and inventory systems, but will build on the investment already made in printers. Dynamic packaging tools, supporting real-time price changes, can be tested on tailor-made holidays before they are applied to mass-market products.
Stage 3: A major technology vendor or industry body offers agents value-added software. This software will allow travel agents to search for holidays according to different criteria, and print customized brochures. Operators will need to adopt standards for data interchange (such as those developed by the Open Travel Alliance, or the Travel Technology Initiative). Specialist operators have the most to gain from establishing direct access to agents and helping them sell, because the expense of individualized training and the need for premium retail shelf space would be eliminated. Agents, in turn, will benefit from finding the right products for their customers. This should deliver higher margins and also boost customer retention.
Stage 4: Vertically-integrated tour operators follow suit for their own retail chains. If value-added software brings a real return on investment, large vertically-integrated operators like Tui and Thomas Cook will invest in it—but only for their own outlets in the first instance. This tactic will support directional selling, and help tour companies avoid dreaded consumer comparisons between several operators.
Stage 5: One major tour operator breaks rank and offers its flexible, comprehensive e-brochure facilities to independent agents . To maintain market share, other operators will need to follow this lead. The leisure travel industry will now have a technology-enabled sales process that works in real time. It will match demand to supply more effectively, and support marketing of package holidays on a wide range of criteria that matter to travelers not price alone.
- Tour operators won’t quickly be able to replace sales techniques based on printed brochures aimed at the mass market. It is too much to expect struggling operators to make large, up-front investments in IT and process change, while concentrating on cash flow and other business headaches. Initially, e-brochures will be used to counter stock shortages, and for cheaper delivery of individual brochure requests. They’ll also support sales of specialist products lacking adequate shelf space. The next step offering a range of customized brochure will require significant changes to tour companies’ IT systems and business processes. And before travelers can easily compare holiday options with the help of real-time guided selling tools, tour operators will need to rethink the fundamentals of their sales process. This can’t happen until an e-brochure infrastructure begins to prove its value in retail agencies, and long-held attitudes change through positive experience.
- Improvements in online sales processes will mean fewer printed brochures, and better, more up-to-date information for customers. When people can easily search the Web to find suitable and available holidays, they’ll rely less on picking up the same information from printed brochures.
- Build e-brochure functionality in stages, and use cost savings at each step to fund further advances in technology and processes. Specialist operators, industry standards groups and vertically-integrated tour operators must cooperate to promote e-brochures, and bring constructive change to the industry as a whole.
- Start by giving agents subsidies for high-quality printers, and encourage on-site printing in answer to specific customer requests . One risk of e-brochures is that the print quality may fall short of what customers are used to in older brochures. Ensure the fast adoption of high-resolution color printers through incentives, so agents don’t complain too much about the cost. E-brochures should sell themselves through the early benefits of better stock management and higher customer satisfaction.
- Develop guided selling tools, so agents can build their own brochures in some cases, and see the benefits at first hand. Agents will need to capture travelers’ requirements and preferences, and choose products to suit. These tool also known as “recommendation engines” will support a consultative sales process, and help agents at all levels to deliver consistent advice. The move toward consultation-based selling should make tour operators more flexible and profitable, and please travelers by delivering a set of highly relevant, still-available offers, with up-to-date pricing.
Focus your talent strategy on the future shift in the demand-planning organization. This includes developing demand planners that have functional expertise, as well as an understanding of the end-to-end supply chain and the commercial side of the business. Organizations lacking critical skill sets engage in future-focused recruiting, training and development, and career path strategies to fill the gap.Although it's tempting to consider changing an organizational structure to address a shortcoming or simply to shake things up, resist the temptation until you've considered all options and have mapped out a thoughtful change program. Analyze the line of sight between work processes and the organization before you spend time redrawing the charts. Regardless of which organizational structure you choose, it's critical to determine how effective and efficient it is. A measurement framework
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