UKCBC Unit 14 : Tour Operations Managment

Introduction

The tour and travel industry has been experiencing the increase in the number of operators and the resulting competition has been able to bring innovation in the sector. The categories of service have increased, and so have the types of customers. Increase in the customer service and base across the globe has been primarily due to the changing mind sets of people across the globe. However it is important for the executive in the tour operation sector to understand the different type of customers and come up with various methods to fulfil their demands.

Task 1 - P1. 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

The growth in economy in the developing nations has resulted in the increasing number of tourists across the world. As a result of which the tourism sector has seen the worldwide growth in the last few years. The attraction of the business potential in travel and tourism has enticed a number of new players to the sector. Along with the increase in the number of tourists, the need of ample number of tour operators has been evident.

Emergence of a number of tour operating companies has resulted in the standardisation of services. The tour operators usually combine various elements of travel and tours in order to form a standardised and sellable service by creating holidays and tour packages, and then market the product as travel packages with various specialities. The tour operators make the tour packages while they set up contracts with the accommodation and hotel operators, and transport operators including airlines, railways, and taxi services. The packages are designed in such a way that the customer availing the tour facility from a particular operator will be provided with partner flight service to travel to a tourist destination, and later he or she will be provided with partner travel arrangement from the airport or railway station to a partner hotel and then services of the hotel and other local representative. The word “partner” in tour operation means the associated but unrelated companies providing different services. They enter into contract with tour operators in order to obtain bulk booking and regular business opportunity. The tour operators charge a single price for all the services rendered on a tour, and the price is charged for a single package known as holiday package (Burkart & Medlik, 1975).

This holiday package trend is becoming more acceptable and hence very famous these days. Because of the increasing technology support and wider associated sector, the tour operation has become more sophisticated. It is no more difficult to arrange facilities for the customers who are in remote places and the customer segment is also increasing at the same time. Increase in awareness among customers in terms of travel and tour requirements have become a boon for the industry. There were communication and information management problems in the tour operation sector, which has been apparently solved by the acceptance of English as global language. Even if English is not known, local partners and tour individuals are pitching in to facilitate better communication medium for the travellers. Moreover the problem resulting from foreign currency exchange has also been mitigated. Because of internet, it is easier for consumers to decide their required packages online. The freedom given to the consumers have resultantly given rise in the increasing number of travellers. Increase in the facilities and advent of technology in the tour operating sector has resulted in slow but steady sector-specificor specific problems. Tour operators are using various methods to create packages for every type of needs of different customers. Lack of time in the increasing hectic style of professional lives of people has also triggered the need of a third party to do all arrangements. Tour operators make sure that the packages are designed less expensive for the customers to certain travel and tourism destinations which would be much expensive if organised separately by the customer (Cooper, 2008). This is possible because of the contacts tours and travel operators have now a days.

The features of the offered products and services have been more or less homogeneous. Presence of a number of players in the business across the world has also given rise to the firmer competition in the market. New and smaller entrants in the businesses have forced the larger and dominant players like Thomas Cook and Cox & King to become more competitive. The companies are always in the process of devising better strategies and innovative products in order to attract larger audiences from the same set of potential buyers. The pattern of changing preferences of customer and dynamic needs of the tour operation sector have affected the transformation in business approaches by reforming the way business is carried out. The companies working in the tour operating sector are moving more towards market oriented business strategies. Moreover the increases in people’s disposable income across economies, and with the availability of vacation period have generated the growth in the tour operation business. But the choice of tour service providers has given the customers with more power and flexibility to negotiate at the same time. The tendency of tour operators moving towards more with market orientation strategies show the change in business approach, by aligning the business process and plans with the needs of customers. Changing trends in the market and dynamism present at large have forced the tour operation companies to respond to the changes and adapting according to the customer demands. The business objectives of travel and tour operators are reliant on the accurate and effective implementation of marketing and innovation activities. Tour operation being a service sector, it is important for the businesses to value the customer satisfaction. In the service segment, customer experience is very vital because of the process of value delivery and its subsequent results. Services offered by the operators can be experienced and evaluated on the basis of service quality; unlike delivery of the goods where the customer has option to evaluate the tangible product. The tour operators need improved mechanism over the value provision procedure to produce consumer contentment (Cooper, 2008; Burkart & Medlik, 1975).

Task 2 - P2. Understand stages involved in creating holidays

P2.1 Assess the stages and timescales involved in developing holidays

The following nine key stages are required to complete the holiday development:

  1. Research: This is the first step where the operator has to choose research methods about the destination including the political, social, economic and technological situation, and the main attraction of the place. It is also crucial to research on the availability of suppliers.
  2. Tour Itinerary: The step includes gaining knowledge about the initial point, the itinerary, the visiting points, and accommodation details. Las Vegas offers a lot of options to explore, and the tour operator has the freedom to select the necessary offerings to be included in the package.
  3. Negotiations and Cost: It is necessary to negotiate with the suppliers to arrive at a mutually agreed competitive price. The operator decides the cost in order to gain profit from the deal and provide correct price to the customers. In Las Vegas, it is not difficult to find suitable suppliers.
  4. Pricing: Pricing is very important factor and the operators usually follow the method of summing up the cost and the profit margin. However it is important to consider outside factors like government policies and price competitiveness of the competitors. Las Vegas wedding can be aptly priced at premium level, which gives the suitable Vegas style wedding feeling.
  5. Human Resource: Wedding in Vegas requires ample human resources to meet the seasonal demands.
  6. Marketing: Next step is to identify target customers and market the product aggressively with focus on experience and better service as selling point. Vegas style wedding are easy to market to the right customers.
  7. Brochures: Brochures with details of the tour should be distributed to the customers via different channels.
  8. Operation and Execution: After all the planning and blueprint, it is important to pull off the event successfully according to requirement.
  9. Evaluation: Getting feedback from customers help in improving the future performance (McIntosh, Goeldner, & Ritchie, 1995).

P2.2 Evaluate the suitability of different methods of contracting for different components of the holiday and different types of tour operator

In the competitive era it is wise to outsource few areas of operation and focus on the core strengths. Major areas which can be contracted to outsiders include accommodation, carriers, and ground operators. It is better to directly contract airlines and at the same time negotiate with travel agencies. The better option whichever provides cost effectiveness should be adopted. New entrants should choose to contract travel agencies and then focus on having a good relationship with them. The agencies hold the power of bulk booking and even future booking advantage. Various other parties should be contracted for other components of package; such parties are ground staff, local transport vendors, restaurants, banks, money exchanges, sightseeing vendors, and insurance companies. However the contract fluctuates depending upon the extent of the activities performed by outsiders and capacity to handle. Moreover it is advisable to include penalty clauses for non-competent contactors (Yale, 1995).

There are four broad categories of tour operators:

Inbound Operators: These operators directly serve the tourists providing all amenities covering their arrival to departure. They provide accommodation, travel, currency exchange, entertainment, information support, and insurance services.

Outbound Operators: They are specialised in creating tour packages and selling the packages to the potential clients. They develop and promote specialised tour packages, and take care of necessary credentials for tourist going on foreign trips. They also enter into contract with the inbound operators who take charge from the point of arrival.

Domestic Operators: A number of the players are concentrating on the domestic market to gain from the local market potential. These operators provide local tourism services.

Ground Operators: These operators provide the arrangements and take care of services like travel, accommodation and sightseeing (Goeldner, Ritchie, & Mclntosh, 2006).

P2.3 Calculate the selling price of a holiday from given information below

The operator has to consider the cost of the package, prevailing exchange rates, future fluctuations, client discount, and financial risks while deciding the selling price of a holiday package. Other risks including airline payment and supplier payment is also vital while keeping a buffer for safe pricing. External factors such as government policies and market factors like price competitiveness are also important to consider. It is advisable to determine the minimum possible price with a profit margin for competitive pricing. With the breakeven point in mind, and competitor’s’ offering at sight the company can decide the appropriate pricing (Mcintosh, & Gupta, 1977).

From the given choices, it is advisable to choose Rhodes with the help of external local agents. The calculation of the package cost (choosing Avra Beach Hotel) is shown below:

7*30 (Hotel Stay)

+ 15 (Pick up)

+ 130 (Flight Tickets)

+ 10 (Drop off)

= EUR 365 (with extra EUR100 in case a local representative is making daily visit to the hotel)

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Task 3 - P3. Be able to review brochures and methods of distribution used to sell holidays

P3.1 Evaluate the planning decisions taken for the design of a selected brochure

With increasing number of tour operators entering into the market, it is crucial for Thomas Cook to prioritise its brochure designing. The brochures talk a lot about the company’s service types and available options to the potential travellers. The brochures designed by the operators outline the service quality, possibility of the value for the money, attractive images of the destination, and the prominence of the company’s product in the market. A number of strategic and tactical decisions made by the tour operators should fit into the brochure in order to give an effective and overall image of the service quality. For marketing department of Thomas Cook, the usage of brochures is very important as it is a vital marketing principles oriented tool. It encompasses an ample amount of information, if not the complete materials, about the details of the holiday packages; it covers most of the obvious information essential to make a reader understand. The usage of brochures is to make the potential travellers aware of various options provided by the operator. It is helpful in exhibiting, persuading and encouraging the customers to opt for the holiday packages provided by the operator (Holloway & Taylor, 2006).

Marketing department of Thomas Cook plays the most significant role in revenue generation for the operator. Hence it is important for the marketing executives to make best use of the most effective tool they have in the form of brochures. It has been widely accepted that the most of the marketing of the holiday packages depends on the brochures as compared to other marketing activities aimed at attracting the customers. While pitching about the holiday packages, the sales executives can try and create an elaborated idea about the holiday through the details given in the brochures. The holiday package details can be best fit into the shape of an idea for the customers, but with the help of brochures it is possible to visualise the details in an elaborated manner (Fletcher, Gilbert & Wanhill, 1993).

Thomas Cook tries to encompass the following things in its brochure:

  • Name of the company
  • Details of travel destination: description of the travel destination and other attractions related to the destination
  • Travel plan: transport mode to be used, and the details of carrier name and the type of service offered by the carrier
  • Travel time: time duration of the stays at all the tourist destinations in terms of total days and nights
  • Accommodation type: type of hotel and type of meals included in the plan
  • Price: tentative price (in most of the cases it is excluding taxes) to be charges for the entire package; it should also cover any extra charges which are chargeable for other services. It also covers the terms and condition of booking as well as the details of cancellation process and fees related to the process.
  • Ground operator details: details of the services provided by the operators and the details of the special arrangements and facilities
  • Documentation: the terms of insurance that is dependent on the holiday package. Also includes the list of documentations required for travelling in the destination jurisdiction

The structure and flow of the brochure should follow the logical approach, which enable the reader to have a clear idea about the materials. The brochure must have a cover page which ideally contains information about the holiday name, theme, and time frame of the holiday. Other basic details such as the name of the tour operator company and the tour id are very much essential. The structure of the brochure is generally divided into sections and sub sections. It should contain the brief travel plan, the details of the tour features, types of accommodation, modes of transport, specialty of the tourist destinations, the payment details and payment conditions, and the details about required documents (Gartner & Gartner, 1996).

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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 2014 and Thomas Cook Cruises Summer 2014

Thomas Cook uses a number of mediums for promoting its holiday packages. To market its products and services, the company has primarily used the traditional brochures along with various other alternatives. For better visibility and effective campaign, the holiday packages are increasingly promoted through direct selling, sales promotion, and creative advertising campaigns (Withey, 1997). However in the last few years, the marketing department of the company has shifted its focus from traditional brochure centric promotion approach to effective use of internet. The company has leveraged on its creative marketing executives in making successful attempts of promotion. Increase in the usage of internet has resulted in the focus shift from traditional approach to modern method. Thomas Cook uses the following methods of promotion:

  1. Audio-visual and simulated brochures: Thomas Cook has used this effective medium of promotion, which provides audio and video based details of the holiday packages. The company has used an alluring video presentation shot on a cruise to promote the Thomas Cook Cruises Summer 2014. Simulated brochures for the cruise tour packages are arguably the better substitute to old-fashioned paper brochures. Simulated brochures are more interactive in terms of usage and provide virtual experience to the viewer. Simulated brochures are useful in promoting the packages on social media platform because of the suitability. Moreover the company has leveraged on the fact that the brochure can be shared easily through the readers on social media platform, which will provide better visibility and impactful promotion.
  2. Online Brochures: Use of technology has been on the rise affecting every aspect of business. It has become an integral part of everyday life for the business and the individuals. All the tour operation companies are making the best use of technology available to promote their products. In such scenario it is not advisable to stay behind. Thomas Cook has the potential in terms of technology and the company can start using online brochures which are effective in cost cutting and ease of usage. Summer 2014 is a low budget holiday package, which needs cost conscious approach towards promotional activities. The similar kind of strategy can be used for Air Tours, and Thomas Cook Cruises Summer 2014.

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

Various types of distribution methods can follow suit the finalisation of product brochure. Tour operators use various types of distribution approaches to circulate their brochures to the customers. Distribution of the brochures to the customers is more important than the designing and preparation process. The methods of distribution vary according to the marketing strategy adopted by the operator. Few operators choose to use direct selling, and others hire outsiders to take care of the brochure distribution task. The methods of brochure distribution can be done through internet, call centres, text messages, or telephone calls. A number of large tour operators print thousands of brochures and dole them out through retail travel agents, operators and other retail outlets. The main objective of the exercise is to reach out to the maximum number of customers (Tepelus, 2005).

In case of the Thomas Cook group, the company can send newsletters and brochures directly to its customers who have travelled with the company for at least once. The company can also focus on reaching out to the potential customers and distribute attractive brochures. The type of potential customers includes the big corporate accounts and bulk booking customers. It can also take help from its ground operators who possess the capability to influence the customer choices directly.

External agencies can also be given charge of some areas. Usage of telemarketing and bulk texting approach is also effective. However online brochure distribution approach should be given utmost importance as it commands a wide range of target customers. The efficiency of online brochure comes from the possibility of sharing the brochure easily and effectively. Online brochures also come with the option of modifying the content and personalising according to the customer type. Personalised brochures give a special feeling to the reader.

Task 4 - P4. Understand strategic and tactical decision making for tour operators

P4.1   Evaluate the strategic decisions made by different types of tour operator

The tour operators are very active in taking strategic decisions in every step of their business in order to excel in the dynamic market condition. The changing scenario in the travel and tourism sector has always triggered the need of active participation of strategic machine of tour operating organisations. The strategies taken at each step by the tour operators include the pricing strategies, the surcharge policies, brand positioning of the company and creating a strong brand name, choice of various constituent of the holiday package depending on the needs and fondness of the target market consumers. The other strategies related to the day to day operation of the tour companies include the selection of suppliers. The supplier selection comprises a number of components representing similar type of strategic position of the company. The relation between the company and the supplier depends on the transactional relations, quality of service rendered by the suppliers, and type of services offered by them. Moreover the pricing factor of the suppliers also comes into picture, which decides the margin for the tour operator after the expenses incurred in terms of price charged by the suppliers. Other steps taken by the tour operators are the design of service brochures, which encompasses the branding exercise of the company. Cox and King provide an easy to read and enticing packages on its brochures. It helps the company to pitch its branding through the brochures; the company is known for its array of packages which are simply explained and they easily attract the consumer attention. The distribution of brochures area also important, which decides the target market and reach of companies offers to the appropriate travellers. The channel of promotion is also very crucial for the tour operating companies. If the medium is not catching enough attention then the entire exercise is not useful. Companies also decide upon the price competitiveness and other similar marketing related strategic decision based on the competition scenario and position of the company in the market (Negi, 1997).

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P4.2 Compare the tactical decisions that could be taken by a selected tour operator in different situations

The emergence of middle class population in the eastern economies and the rise in disposable income level among the people has resulted in the surge of frequent travellers across the globe. The market has offered a number of choices to the consumers and the trend of new entrants entering into the market have increased. This trend has given the consumer with more power to negotiate and the tour operators are increasing becoming the side with lesser advantage in the negotiation process. In the dynamic market scenario, things are changing very quickly, and similarly the needs of the clients are changing accordingly. The tour operators have realised that they have to be very active in making tactical decisions to be able to profit from the fads and trends of the market. The tactical decision making process has become very common in tour and travel industry.

The tour operators have to choose from a number of options in order to act in different situations. The availability of options may prove to be unfavourable at times, but the tactical side of the business decision making needs the managers to take right steps to be able to excel in the competition. There are different situations which will change the decision of a particular price of the package. Tactical decisions are always situation based. There are several factors impacting the decision making process. Pricing of different holiday packages is an example of tactical decision making in practice (McCool & Moisey, 2001).

One example of making apt tactical decision is by offering value added services in the holiday packages. The operators like Make my Trip and Musafir.com (in Indian market) compare their competitor’s offering in the similar packages, and then they try to add few extra values by offering additional services to the customers.

Tour operators like Thomas Cook and Cox & King operate at global level. They provide holiday packages for thousands of customers who travel around the world. The wide range of customer base comes with the variety of currency. While fixing the price of the holiday packages, the global operators need to be certain about the margin they will be able to generate. A number of factors such as currency fluctuations will affect the pricing drastically. In case the currency fluctuation is high, then the price has to be fixed considering the effect of currency fluctuations on the cost of the package. Another scenario related to the pricing tactic is with the ability to modify the prices according to the level of competition faced by the operator in terms of price competitiveness. If other competitors are charging lower price for similar type of holiday packages, then the company need to slash its prices in order to give fair pricing image in the market. Similarly the operators also take other tactical decisions like choice of air transport partners in some cases, and choice of accommodation partners in most cases. The tactical decision making skill is crucial in deciding the quality of the service offered, and hence the overall image of the company also gets affected (Poynter, 1993).

Conclusion

The array of services offered by the tour operators has opened new opportunities in the travel and tourism sector. The usage of new methods of promotion has increased, and innovation in marketing strategies has been evident. With the help of outsider, the tour operating companies are able to come up with packages which are appealing in nature and beneficial for the company. However the business in tour management is very stringent and the players have to continuously turn up strategic and tactical thought machine in their organisation to survive in the increasing competition.

Reference

Burkart, A. J., & Medlik, S. (Eds.). 1975. The management of tourism. London: Heinemann. Cooper, C. 2008. Tourism: Principles and practice. New Jersey: Pearson education. Fletcher, J., Gilbert, D., & Wanhill, S. 1993. Tourism. Principles & Practice. London: Pitman Gartner, W. C., & Gartner, W. 1996. Tourism development: Principles, processes, and policies (pp. 110-112). New York: Van Nostrand Reinhold. Goeldner, C. R., Ritchie, J. B., & Mclntosh, R. W. 2006. Tourism: Principles. Practices, Philosophies. New Jersey: Wiley. Holloway, J. C., & Taylor, N. 2006. The business of tourism. New Jersey: Pearson Education.

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