UNIT 14 TOUR OPERATIONS MANAGEMENT

Introduction
Tour operators are considered one of the vital stakeholders in entire international tourism industry worldwide. By getting into horizontal and vertical integration some organization has become so dominant in marketplace that entire supply & demand scenario is being affected by such organizations. Tour operators can be defined as agencies which sell combined package of transportation, accommodation and other purchased elements directly or indirectly to consumers. The present paper would explore tour operators industry in travel & tourism, examine stages for holiday creation by tour operators, review of the brochure & method of distribution for selling holidays and understanding tactical & strategic decisions made by tour operators.  
LO1 Understand the tour operators industry within the travel and tourism sector
P1.1 – Analyze the effects of current and recent trends and developments on the tour operators industry.
Growth in domestic as well as international tourism sector would keep its pace and according to World Trade Organization it would maintain standard annual growth rate of over 4%. Development of technology such as e-Commerce has also helped international tourism to expand itself at geographic location where physical presence of tour operators was not possible. Year 2008 witnessed increase of more than 1.9% in arrival giving total of 992 million international tourist arrivals as compared to the total number of tourist arrival in year 2007. Total tourism receipt grew to $944 billion in year 2008 with an increase of 1.8% in real terms as compared with the receipts figure of year 2007 (Page and Connell, 2006).
Some of the major trends in the current time include mass market tourism, niche tourism, customized holiday packages, changing demographic conditions, market research and PESTEL factors. Mass market tourism is the recent trend in tourism industry where in large number of people travel along on a tourism destination for leisure and this trend is gaining momentum in places having sun, sea and sand. Due to large number of people travelling together the overall cost for the tourist would reduce due to economies of scale. Some tourists are having special interest in flora & fauna, artistic work, culture or heritage or in any other thing which becomes the major reason for visiting the destination. For such tourist special packages are being designed by the tour operators keeping in mind preferences for these special tourists. Being a customized package generally these packages comes with high cost and premium services are being provided by the tour operators for such tourists. Trends for niche tourism is increasing at rapid pace in current market scenario where in people are willing to visit distant places of their choice.
Demographic conditions for the source countries for tourism such as UK, France, USA and Australia are having high number of young population interested in fun & sports activities instead of being more attracted towards heritage & cultural aspects. Due to this changing demographic there is greater demand for places offering such tourism activities. Research in the field of tourism have initiated a new trend where in tour operators  carry out research based on the historic data of trends for the visit of tourist for particular destination. Based on these trends new holiday packages are being designed by the tour operators leading to shift in the tourism industry from existing market trend (Syratt, 2003).
PESTEL factors are changing and changes in PESTEL factors would lead to the great changes in tour operator industry worldwide to compensate for the changing needs of the consumers. Political factors have motivated tour operator industry with regulations in ecological structure, occurrence of overseas deals and stability in political situation for major tourist countries. Social issues such as problems with development of local life and community mobility make adverse situations for the travel and tourism industry. Economic factors are both in favor as well as against the tour operator industry where in elements such as concern over tax structure and global buy/sell concern poses challenge while factors such as increasing spending power and international trades are adding value to the tour operator industry worldwide. Technological factors are of great importance for the tour operator industry where in increasing communication, industry enlargement and modern reservation systems are helping the tour operators to reach customer base which was not possible earlier due to lack of technology in the tour operator industry. Hence assessing current trends prevailing in the tour operator industry it can be said that tourism industry would continue to grow at a rapid phase and with the coming time this growth would be fueled through supporting factors such as technology and economic factors.
LO2. Understand stages involved in creating holidays:
P.2.1 Assess the stages and timescales involved in developing holidays
Planning for development of holidays is a lengthy process and sometimes takes as much as 2 years to plan for an entire holiday package. One of the vital issues in the planning process for holidays occurs in estimation of price which is mainly due to the reason that currency fluctuations and tax structure in different currencies would affect the overall pricing for development of holidays. The first step in the development of holiday would be an extensive research for the newly planned holiday destination. Forecasting factor for tourism industry is most impacted by the changing trends in the industry and most of the forecasts in the industry prove to be wrong. Change in the tourist pattern and preferences leads to changing industry dynamics which makes market research for the tourism industry a vital step.
Market research should also make cost considerations as international destination planning would depend on the currency prices prevailing in other countries at the time of vacations, tax structure and any change in the economic factors. Further development of holidays would require selection of 4 or 5 potential destinations for the holiday. Selection of these tourist destinations would be a result of the research conducted and price considerations for these holiday destinations (Swarbrooke, 1999). Further choice for the tourist destination would be narrowed by opting out some of the probable options from the list of 4 or 5 selected destinations and making a final choice for 2 to 3 destinations. Third step for the holiday development would be negotiation process and negotiation process would start with the stakeholders to develop contract.
An appraisal of these selected destinations would be made based upon the selected factors so that a final destination for the development of holiday can be made. Decision of mass market tour operator would be more conservative in terms of switching the tourist destination and focus would be more on a single destination for making it as holiday destination while specialist operators would be more flexible in terms of changing the tourist destinations. Another factor which creates hurdle for the mass market operator would be fixed long term contract made with the hotel owners and transportation owners. Looking into the timescale for each planning step market research is the step which takes maximum amount of time in entire planning process and it takes 60% of the time for overall holiday development. Further negotiation process is second most time consuming factor consuming 40% of the total time for the development of holiday package. An ideal holiday development program consumes 1 year to 2 years of time for a tour operator.  
P.2.2 Evaluate the suitability of different methods of contracting for different components of the holiday and different types of tour operator
There are basically two different types of contract methods being used by the tour operators in present age which are sale only contract and fixed contract methods. Both types of contract can be given as under:
§  Fixed contract: Fixed contract are made by tour operators with other stakeholder such as hotel owner and transportation owner with a fixed amount is being paid by them without depending upon the filling particular service offered by hotel or transportation agency (Johnson et al, 2008). In case the hotel room would not be filled then tour operator have to pay the dealer amount which was initially fixed by them. Such contracts are generally made at cheaper prices in comparison to the sale only contract. Such contract yield higher margins for the tour operators at the peak season time when all the rooms are filled. Such contracts would be beneficial for the dealers as they are getting an assured amount without being worried of a good season or bad season. These types of contracts are generally more prevalent in the mass markets.
§  Sale only contract: These contracts are different from fixed contracts and price is being paid for the sold facility only. These contracts are simple and generally being used for the mass markets. Income generated for dealers through these contracts would depend upon the number of tourist coming to the hotel or transportation agency.
 P. 2.3 Calculate the selling price of a holiday from given information
In the given information name of the resort would be considered first, for example resort name is Sun Villa Resort. There are possibility that room reservation system maintained in hotel contains discount in form of buy two get one free for the hotel rooms. Such discount factors would depend upon the bargaining power of dealer. For the present package suppose there is requirement for the 10 single and 10 double rooms having cost of £150 for each double room while£50 for each single room offered by the hotel. Another factor impacting cost would be transportation from the airport to the hotel depending upon the total number of person travelling small bus or other vehicle can be booked for travelling from airport to hotel rooms. In case there are additional customization elements in the hotel package such as additional lunches, flower decoration or any other customized services demanded by the customers there would be additional prices for the tour. Hence for the current package with the standard version price would be calculated based on the price charged by hotel owner and additional margin which would be taken by the tour operator for providing services to the consumers. In present context, total charge of £2000 excluding the charges for the transportation from airport to the hotel rooms (Holloway, 2002).
 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 a selected brochure
Design of a selected brochure is very important decision for the tour operator industry and planning process for the design of brochure would include four major steps which are given as under:
§  Research for planning: Research for the planning process required in brochure design for any holiday development is important step and successful brochure development process must include a well research planning process. Though research is an exception to the overall planning process but brochure design is an integral part of the marketing part and planning process for the tour operators. Research is carried out in order to understand customer profile to which brochure would be addressed to and type of tourist destination for which brochure is developed by the tour operators. Depending upon these factors and by analyzing historic records for the brochure design research is undertaken by the tour operators for brochure design.
§  Supplier negotiation: After researching the design and other parameters required for the planning of brochure second important step would be to negotiate with the supplier of the brochure. Cost of brochure constitute the major part for the marketing efforts as now a day high amount of expense is made on the brochure and there are different types of brochure designed by the companies in order to attract their consumer segments depending upon the reach, time and cost required to attract the consumer segment (Cooper et al, 2005).
§  Admin: Role of admin in brochure designing process is to examine the entire brochure and ensure that it can serve the purpose for which brochure has been designed by the tour operator. Admin team also check whether brochure contains right details hence verification of various details and accordingly rectifications in any of the details is made by the admin team in brochures. Further role of admin team is to ensure that whether brochures have potential to address a mass market segment or niche segment as decided by the organization. In other words admin team examine whether brochure is in accordance with the strategic decisions made by the organization on catering mass or niche market segments.
§  Marketing: Role of marketing team is to distribute the brochure and ensure that these reaches to right customer segment so that awareness regarding holiday package can be provided to the potential consumers of the organization. Marketing team may use several ways in order to distribute the brochure such as through print media, direct distribution, banners & outdoor display and online marketing of e-brochure. Marketing team in collaboration with the information technology department of the organization can distribute the brochure electronically through several mediums such as social media websites, mails and online banners etc.
Hence complete planning process for the brochure designed by tour operators would be accomplished by four steps where in role of each step would be different and without any of the step process of brochure designing can’t be completed. Role of planning process is to add strategic aspects in the brochure design, role of supplier negotiation is to reduce overall cost of brochure design and develop long term contract, role of admin is to ensure whether or not brochure matches with the strategic decisions of organization and finally role of marketing department is to distribute the brochure to reach the end consumers of the organization so that awareness can be brought among consumer segment with the help of brochures.
P.3.2 Assess the suitability of alternatives to a traditional brochure for different types of tour operators
Traditional brochures for the tour operators are in use since long time where in physical brochures are being printed and distributed to the target segment of the organization in order to aware consumers regarding service offerings of the different tour operators. But the physical distribution system has its own limitations in terms of the reach, higher stationary expense and higher marketing expenses as well (Porter, 2004). An alternative to the traditional brochure system can be through e-brochure designed by the organization for their customers. E-brochure may include multiple page content, with content written by professionals in tourism industry and artistic works in term of graphics and pictures provided through an online medium which can be a website, mail, online banner or can be social media application as well.
There is high potential in E-brochure alternative due to increasing number of internet using population in UK which has reached to a number of 11.4 million people accessing internet hence reach for the e-brochure would be much more as compared with the physical brochure. Further more than 51% of the organizations now days are involved in online sales and purchase business which enhances demand and trend for the e-brochure system as it is also similar to the online sales purchase business. Some of the factors which highlight appropriateness for e-brochure can be given as under:
§  E-brochures are environmental friendly way of promoting the tourism business hence reducing carbon face for the tour operators
§  Another important achievement through e-brochure is reduction in market place incursion time
§  E-brochure enhances reach for the tour operators in terms of their customer base as through physical brochures only particular markets can be catered by the tour operators while there is no such limitations through e-brochure
§  With accurate database for the particular target segment e-brochure can make their reach to the specific segments where physical brochure would not be able to penetrate
§  It is easier for the tour operators to change any information which is not valid through e-brochure as compared with the physical brochure where change of information is not possible so frequently
§  There is cost saving involved through e-brochure as these brochures would be helpful in reducing marketing, material and designing cost
A case study for the e-brochure can be adopted from Thailand which is home to more than 20 million tourists every year. Thailand has used e-brochure method in order to showcase its rainforest, natural beauty, heritage tourism and beaches. All these factors have become point of central attraction into worldwide tourism market through e-brochure method used by tour operators in Thailand (Syratt, 2003). With implementation of e-brochure method where in tour operators has got a wide reach which is much better as compared to the traditional brochure method and mass market awareness has been successfully managed with much lower cost as compared to other methods of brochures.
P.3.3 Evaluate the suitability of different methods of distribution used to sell a holiday for different types of tour operator
In order to sell holiday packages there are generally four major types of sales methods which are given as under:
§  Brochure distribution method: Brochure distribution is one of the oldest method of selling holiday packages started by Thomas Cook in 1953 but one of the most effective method as well. The change observed in the brochure distribution has changed as the initial brochures which used to contain just the formal information of the holiday destination has now taken the form of holiday catalogue just in similar manner to the women magazine displaying various clothing options for them. Brochures are sold to the potential consumers of firm along with the contact information so that potential consumers can interest the tour operator in case they are willing to travel to the destination highlighted in the brochure (Thomas cook, 2010). There is very low impact of the brochure distribution method in present age due to uncertainty over type of services provided by the tour operators on these travel packages. Also several tour packages highlight very low cost for the travel package in order to attract the consumers but there are several hidden charges along with the charges displayed which reduced credibility for the brochure distribution method.   
§  Website distribution method: Website distribution method is technology enabled method for selling holiday package where in with the help of technological tools present on internet such as email, social media and websites brochures are being distributed to the potential consumers of the tour operators. With increasing access to internet among present age consumers this method of selling holidays is most effective and gives very little cost for the tour operators. Another advantage of the website distributed method is its high reach as this method can penetrate into the locations where in physical distribution of brochure can’t take place. With help of website distribution method website developed by the tour operators would be advertised so as to bring traffic on the website.
§  Agent distribution method: Agent distribution method for selling holidays is aimed at achieving several objectives which are not possible with other methods of selling holidays such as brochure distribution method and website distribution method (Porter, 2004). There are three types of agency for distribution which are maniples, multiple and independent. With the help of agent distribution method sales are achieved, agents are having detailed information on products due to which it becomes easy for them to explain, it becomes easier to understand by consumer and contract between two parties can be made and to provide critical information to decision makers so that decision regarding selection of tour package can be done instantly.
§  Direct selling distribution method: Direct selling distribution method employ selling of holiday package directly by personnel employed by the organization. This method of holiday selling is both direct to consumer or enquiry based where in based on consumer enquiry direct sales personnel are sent to consumer in order to provide information and carry out sales for the holiday package by contacting consumers. Direct selling distribution is effective as personnel touch is involved in this and cost of direct distribution is much lower as compared to the methods such as agent distribution and website distribution method.
P. 4.1 Evaluate the strategic decisions made by different types of tour operator
Visiting an attraction has become a part of the lifestyle for present age consumers and hence market for tour operators has become highly competitive to attract the consumers basis on several factors of their preference for example price, premium services, customization or personalized services etc. Tour operators need to make several strategic decisions while managing their business for tourism. Some of the major strategic decisions adopted by tour operators in current age include changing destinations to be offered, designing mass packages to attract high number of customers, to develop customized packages to cater need for the small group of tourists (William, 2005).
Tour operators have researched the tourism market very well and it has been derived that offering same tourist destination over and again would not help, hence they need to keep on changing the tourist destinations so that higher number of tourist are being attracted towards newly offered destination. Tour operators now a day design new brochure for each destination and people get attracted when they see new brochure for the tourist destination or through online advertisements. Hence changing destination regularly is a strategic decision for the tour operators as there is cost involved in promoting a particular tourism destination.
Another strategic decision which is important from the tour operator perspective is selection of target market as they need to choose between mass market or the niche segment market. Mass market would be adopted by the tour operators who try to attract large number of tourist at a place same time thereby reducing overall cost for the tour by achieving economies of scale. Such tours are done for the leisure purpose and involve mainly places where sand, water, sea and sun are available. For example large number of tourist gets attracted to Goa, India for such visits. While some tour operators select niche market as their segment in order to attract tourists having particular interest such as heritage tourism or ecotourism. Selection of the market segment would be a strategic decision and would be based on the organizational philosophy as the kind of market a firm wants to acquire and resources which are possessed by the firm in accordance with the catered market segment.
Investment in technology is another strategic decision which is made by tour operators as technology is emerging as the major factor driving tourism industry worldwide. A tour operator organization needs to make decision regarding whether or not investment should be made in the technology and this proves to be an important strategic decision. Decision for investment in technology to be made based on the future potential for earning revenue through investment in technology and expenses which are made for the investment in technology. A financial analysis needs to be done by the organization in order to understand situation for income generated versus expenses incurred for the implementation for the new technology such as reservation management system.
Geographic market served by the tour operator is another strategic decision which organizations make in order to build their customer base in particular region. Depending on the customer profiling for several factors such as age, gender, income range, education and interest level selection is made by the tour operators for geographic region to be selected. For making decision regarding expansion in overseas locations it is important to understand market factors driving tour operator industry in newly proposed location needs to be understood deeply and based on the suitability of these factors decision needs to be taken for entering into the newly proposed geographic region or not (Cooper et al, 2005).
P.4.2 Compare the tactical decisions that could be taken by a selected tour operator in different situations
Every tour operator needs to adopt several tactical decisions while dealing with the business situations in different contexts. Considering the case of Thomas Cook which is one of the most popular tour operator organizations in UK some of the major tactical decisions which are taken by the organization under different situations can be given as under:
§  Credit card not allowed: Thomas Cook does not allow credit card to purchase holidays and recommend to their customers for not using credit card while making purchase for holidays.
§  Lower pricing: Despite of being a premium tour operator organization Thomas Cook tries to showcase itself a lower pricing tour operator organization where in company attempts to sell their tour packages at lowest possible prices. Comparing the tour packages offered by Thomas Cook it still seems to be a good value offering in comparison to other tour operators prevailing in UK. Another factor which forces Thomas Cook to offer holiday packages at much lower prices is their competitors such as Thomas, Flight center and first flight which are performing very well in the industry and due to which lower margins needs to be adopted by Thomas Cook so as to gain higher market share (William, 2010).
§  No fee for children: While some of the tour operators charge for the children while Thomas Cook has taken the decision not to charge any fee for the children of particular age.
§  Additional value offerings: Thomas Cook offers different proposition to their customers such as if any customer pays before one month company would offer free insurance for the customer on the entire tour booked by the customer.
Conclusion
Tourism industry has kept high pace for itself and in current market scenario several market forces are in favor of the tourism industry. There is strong dynamism in the tourism industry and changes are happening on regular basis. Tour operator industry needs to build image for themselves through services provided by them. Holiday planning is a complex process which is dealt by tour operators and involves stages such as negotiation and contracting. Brochure planning is another important activity which needs to be undertaken by the tour operators to attract large number of customers. Tour operators needs to make strategic and tactical decisions pertaining to their business area and these decisions have strong impact on their business.








References

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