distribution channel in tourism

Chapter 9Distribution Channels in Tourism.

Tour Operations Environment

All roads lead to Rome

Chapter Objectives

• Describe the nature of distribution channels• Understand the different marketing intermediaries and the benefits

they offers.• Know how to use the Internet as a distribution channel• Discuss channel behavior and organization• Illustrate the channel management decisions of selecting,

motivating and evaluating channel members.• Identify factors to consider when choosing a business location.• Understand the tour operations environment• Know the range of products and services offered by tour operators

for different target markets• Know how tour operators plan, sell, administer and operate a

package holiday programme• Be able to plan and cost a package holiday

Nature and Importance of Distribution Channels

• Distribution channels is the circulatory system of a hospitality company.

• Competition, a global marketplace, electronic distribution techniques have increased the importance of distribution.

• In the global economic market, companies should create innovative ways to approach to new and existing markets

Distribution Channel

What is a Distribution Channel?

• A set of organizations (intermediaries) involved in the

process of making a product or service available for use

or consumption by the consumer or business user.

• Used to move the customer towards the product

• Selling through wholesalers and retailers usually is

much more efficient and cost effective than direct sales.

Distribution Channel Functions

• Information: gathering and distributing marketing research and intelligence information about the marketing environment.

• Promotion: developing and spreading persuasive communications about an offer

• Contact: finding and communicating with prospective buyers

• Matching: shaping and fitting the offer to the buyer’s needs, including such activities as manufacturing, grading, assembling, and packaging.

InformationInformation

PromotionPromotion

ContactContact

MatchingMatching

NegotiationNegotiation

PhysicalPhysical

Gathering and distributing marketing research about the environment

Gathering and distributing marketing research about the environment

Developing and spreading persuasive communications about an offer

Developing and spreading persuasive communications about an offer

Finding and communicating with prospective buyers

Finding and communicating with prospective buyers

Shaping and fitting the offer to the buyer’s needShaping and fitting the offer to the buyer’s need

Agreeing on price and terms of the offer so ownership or possession can be transferred

Agreeing on price and terms of the offer so ownership or possession can be transferred

Distribution: transporting and storing goodsDistribution: transporting and storing goods

FinancingFinancing Acquiring and using funds to cover the costs of channel work

Acquiring and using funds to cover the costs of channel work

Distribution Key Functions Channel

Risk TakingRisk Taking Assuming financial risks such as the inability to sell inventory at full margin

Assuming financial risks such as the inability to sell inventory at full margin

Distribution Channel Functions

WholesalerWholesaler JobberJobber RetailerRetailer ConsumerConsumer

ConsumerConsumer

RetailerRetailer ConsumerConsumer

ProducerProducer

0-level channel

WholesalerWholesaler RetailerRetailer ConsumerConsumer ProducerProducer

2-level channel

ProducerProducer

3-level channel

1-level channel

ProducerProducer

Channel Level - Each Layer of Marketing Intermediaries that Perform Some Work in Bringing the Product and its Ownership Closer to the Final Buyer.

Number of Channel Levels

Travel AgentsTravel AgentsTour WholesalersTour Wholesalers

ConciergesConcierges Specialists: Brokers & Junket Reps

Specialists: Brokers & Junket Reps

InternetInternet Hotel RepresentativesHotel Representatives

Consortia & Reservations Systems

Consortia & Reservations Systems

Global Distribution Systems

Global Distribution Systems

National, State, and Local Tour Agencies

National, State, and Local Tour Agencies

Marketing Intermediaries

Travel Agents (TA’s)• 57,610 TA in the U.S.A. (2010)

• Decreasing due to Internet and less commission

• Commission: Airlines 5 %, hotels 10%, cruises 15%

• TA’s use toll- free numbers, CRS or GDS* when making reservation for hotels

• Companies are a major source of travel bookings.


* Mostly used

Supplier Wholesaler Travel agent

Tour Packages

Usually Air travel + lodging

may include [ meals + entertainment + ground transportation + sightseeing tours + special entrance fees]

Tour Wholesalers A company that operates as an intermediary between the travel product supplier and the retail travel agent in the marketplace. (Tour operators often operate as wholesalers.)


Tour Wholesalers• Usually targeted at the leisure market• Retail TA’s sell wholesalers’ tour packages.• They get discounts from airlines or hotels• Break even point is usually achieved at 85 % of sale. • USTOA requires $100,000 indemnity bond.• Usually resort hotels are dependent on tour wholesalers • Almost all major airlines have vacation packages

promoted through brochures and their web sites.


• Specialists: Tour Brokers, Motivational Houses and Junket Reps.

• Tour brokersTour brokers sell motor coach tours. Trips to college and sporting events, tours built around Mardi Gras.

• Motivational housesMotivational houses provide incentive travel to companies offered to their employees.

• Junket repsJunket reps maintain lists of casino gamblers. Junket reps get a commission based on the amount the casino earns from the players.


Hotel Representatives• HR sell hotel rooms and services in a distant

market area and receive a straight commission, a commission plus a salary, or a combination of both.

National, State, and Local Tourist Agencies (CVB’s)• Supply information and promote an area, a state or

country.• Usually they deal with conferences, exhibits or

conventions


Consortia and Reservation Systems• A consortium is a group of hospitality organizations that is

allied for the mutual benefit of its members (Leading Hotels of the World, Supranational, Utell, Tulip).

• Reservation systems provide a central reservation services for hotels.

• Hotel Chain Reservation Systems vs. Independent Reservation Systems


Global Distribution Systems• GDSs were originally developed by the airlines in 1960s• GDS’s are computerized reservation systems• GDS connects many CRS of different hospitality companies.• Major GDS’s: Sabre, Worldspan, Galileo, Amadeus.• Amadeus-largest in Europe and Latin America (155,000 TA)• Galileo connects TA’s to 500 airlines, 40 Rent a Car

companies, 47,000 hotels, 370 tour operators.• Worldspan web site: TA’s can book airlines, rental cars, and

shows and make restaurant reservations all from one site.


Global Distribution System

GDS

Starwood CRS

Marriott

CRS

Choice

Hotels CRS

Delta

CRS

Hertz

CRS

Internet• Became an effective distribution channel.• In 2003, Internet sales reached $ 25.2 billion (10% of the

total travel business market). • Total hotel sales over internet $5 billion• Marriott takes 10,000 reservation a day.• Southwest airlines over a billion dollars through its web site.• Restaurants on-line ordering–Pizza Hut, and Domino pizza.• Expedia: Over 7 million visitors a month• Advantages-24 hours, color picture, video tour, accessible

anywhere, print hard copy, low cost,

Marketing IntermediariesTravelocity

Expedia

Priceline

Channel Behavior & Organization

• A channel will be most effective when all members cooperate to attain overall channel goals and satisfy the target market.

• Channel conflict occurs when channel members are disagree over goals and roles

• Conflict occurs at two level:

• Horizontal Conflict occurs among firms at the same level of the channel, i.e retailer to retailer.

• Vertical Conflict occurs between different levels of the same channel, i.e. wholesaler to retailer.

• For the of a channel each member’s role must be specified and conflict must be managed.

Verticalmarketingchannel

Manufacturer

Retailer

Conventionalmarketingchannel

Consumer

Manufacturer

Consumer

Retailer

Wholesaler

Wh

ole

sale

r

Conventional Distribution Channel vs. Vertical Marketing Systems

CorporateCommon Ownership at Different

Levels of the Channel

ContractualContractual Agreements Among

Channel Members

AdministeredLeadership is Assumed by One or

a Few Dominant Members

Degree of Direct Control

Channel Organization Types of Vertical Marketing Systems

•The franchisor permits the franchise to use its trademark, name and advertising.•In U.S.A. 700,000 franchise ~about $ 850 billion salesFranchised hotels account ~ 65 percent of room supply.

Starting a new business: 20 percent chance for survivalBuying an existing business: a 70 percent chance for survivalBuying a franchise: a 90 percent chance for survival

Vertical Marketing System

Franchising

Hotel franchises:

Choice hotels, Holiday Inns, Sheraton Inns, Hilton inns

Restaurant franchises:

Mc Donalds, Burger King, KFC, Pizza Hut, T.G.I. Franchises

Advantages Disadvantages Franchisor

1. Capital for growth2. Faster growth3. Additional management4. Additional income

1. Lower potential profits2. Controlling service quality3. Controlling firm image

Franchisee

1. Lower risk2. Established brand name3. Successful business plan4. Expert assistance

1. Franchisee fees2. Lack of freedom3. Controlled by franchisor

Vertical Marketing System

Franchising

• Another form of contractual agreement

• Allow two or more organizations to benefit from each other’s strengths.

• 7-Eleven sells Dunkin Donuts in 2,000 of its stores

• Embassy suites has Red Lobster restaurants located in its hotels.

• Chain fast-food operations are located in convenience stores.

• Airline alliances: SAS-Continental, Delta-Korean Airlines

Vertical Marketing System Alliances

Trade for preferred relationship with global

networks

Trade for preferred relationship with global

networks

Gain preferred access to each other’s local

customer base

Gain preferred access to each other’s local

customer base

Pool policy expertise,

costs, and capabilities

Pool policy expertise,

costs, and capabilities

Implement consumer-oriented,

commercially driven operations and

services

Implement consumer-oriented,

commercially driven operations and

services

c

Vertical Marketing System Alliances

Horizontal Marketing Systems

• Horizontal Marketing Systems: Two or more companies at one level who join to follow a new marketing opportunity.

• Seaworld offers tickets at a discount to an automobile club.

• In return, Seaworld gains access to several hundred thousand automobile club members

• Multi-channel Marketing Systems: Single firms that set up two or more marketing channels to reach one or more customer segments.

• McDonald’s sells its products through independent franchises, but owns more than one-fourth of its outlets.

• Customer needs• Victoria House in Belize

• Attracting channel members• A small chain hotel be advised to choose one travel

agency chain or work in key cities that are likely to generate business.

• Evaluating major channel alternatives1. Economic criteria

MGM hotel; Tour Operators vs. Travel Agencies.2. Control criteria

Franchise control/quality control

Selecting Channel Members

• Three secrets of successful retailing: “Location! Location! Location!”

• Location depends on the firm’s marketing strategy.

• There are four steps in choosing a location.

• 1. Understanding the marketing strategy and target market of the company.

• Downtowns, freeways, near airports,

• 2. Regional analysis involves the selection of geographic market areas. A firm needs to make sure that a region has sufficient and stable demand to support the firm, today and in the future.

The Business Location

• 3. Choosing the area within the region: Demographic, psychographic characteristics and competition are factors to consider.

• 4. In choosing the individual site, business will consider several factors:

• Compatible businesses, Competition, Potential demand generators,

• Residential communities, profile of prospective customers, shopping centers.

• Accessibility, traffic, speed of traffic, visibility,

The Business Location

Tour Operator (wholesaler)

Vertical integration in the travel industry is when a company has control over other companies that are at different levels in the chain of distribution or in different sectors, for example:

TUI Travel UK owns Thomson and First Choice tour operating businesses, and the Thomson and First Choice travel agency chains (TUI UK is itself controlled by the German company TUI AG)

Thomas Cook AG (a German group) owns the Thomas Cook and MyTravel tour operating companies (including Airtours), plus the Thomas Cook and Going Places chains of travel agencies

Vertical integrationVertical integration

Vertical integration at TUI UKVertical integration at TUI UK

Horizontal integration is when a company owns or has control over a number of companies at the same level in the distribution chain or the same industry sector

For example, many tour operating businesses that are now part of the ‘big two’ were originally independent companies, e.g. Neilson and Club 18-30 (now part of the Thomas Cook Group), and Something Special and the Holiday Cottages Group (now merged with Thomson)

Horizontal integrationHorizontal integration

Trade bodies and associations are established to represent the interests of companies in a particular industry sector.

The following are important trade bodies in tour operations:

ABTA – The Travel AssociationAITO (the Association of Independent Tour Operators) UKinbound The European Tour Operators’ Association (ETOA) The International Federation of Tour Operators (IFTO) Federation of Tour Operators (FTO)

Trade bodies in tour operationsTrade bodies in tour operations

Regulatory bodies exist to make sure that tour operating companies operate in a fair, honest, efficient, safe and secure manner, for the good of the companies, their customers, suppliers and society at large .

The following are important regulatory bodies in tour operations:

Civil Aviation Authority (CAA)Health and Safety Executive (HSE) Trading Standards Officers Foreign and Commonwealth Office (FCO)

Regulatory bodiesRegulatory bodies

Package Travel Regulations Trade Descriptions Act Supply of Goods and Services Act Consumer Protection Act Disability Discrimination ActUnfair Contract Terms Act

Legal framework in tour operationsLegal framework in tour operations

From a lawyer's standpoint, a contract is any agreement that the law will enforce, whether in writing, verbal or implied, i.e. assumed from the conduct of the parties

Contracts range from the very simple, e.g. buying a drink at a resort complex, to the very complex, e.g. building a cruise ship

It is important to remember that when a holidaymaker books a package holiday through a travel agent, the contract is between the customer and the tour operator, with the travel agent merely acting as an intermediary. It is against the tour operator that the customer must seek legal redress in the event of a breach of contract

Contract lawContract law

A tour operator’s bond is a formal undertaking from an approved bank or insurance company to pay a sum of money to ABTA or the Civil Aviation Authority (CAA) in the event of the company's financial failure.

Bond monies are used in a number of ways:

Clients whose holidays are actually taking place when a tour operator ceases trading can continue with their holiday as planned or be brought back to the UK

Clients who have yet to travel on holidays already paid for can get their money back when an operator fails

Alternative holiday arrangements can be made for clients, who have paid for trips that have yet to take place, when a tour operator ceases trading

BondingBonding

An ATOL (Air Travel Organisers’ Licence) is a licence issued by the Civil Aviation Authority (CAA) and is required by all individuals and companies selling holidays and seats on charter flights

Applicants must show that they are fit to hold an ATOL, have adequate financial arrangements and must lodge a bond with the CAA

In the event of company failure, the bond money is used to repatriate clients who might otherwise be stranded overseas and to refund, as far as possible, passengers who have paid in advance but have yet to travel

Licensing - ATOLsLicensing - ATOLs

External influences on tour operatorsExternal influences on tour operators

Natural disasters, such as hurricanes, floods and avalanches, can have serious consequences on an area’s travel and tourism industry

The tsunami of 26 December 2004 was one of the world’s most devastating natural disasters of recent times, killing nearly 300,000 people across a range of countries, including Indonesia, the Maldives and Sri Lanka

Reports from the World Tourism Organisation (WTO) suggest a drop in tourism of as much as 70 per cent in the Maldives, when January 2003 figures are compared with those of the same month in 2004

The people in these countries rely heavily on the foreign currency that tourism generates and have worked hard to restore the tourism industry to its former state

Environmental factorsEnvironmental factors

Political acts such as war and terrorism can have devastating impacts on a destination and its travel and tourism industry

This is particularly true when the destination is heavily reliant on tourism and has few other economic activities

The effects of the 9/11 disaster on world travel still persist today, while recent bombings in Bali, Nairobi, Madrid and Cairo, have immediate impacts on tourism, although most destinations eventually recover lost trade

Political factorsPolitical factors

A sudden change in world currency exchange rates can wipe out a tour operator’s profit margins overnight

Similarly, rises in the cost of oil and other natural resources can push up a tour operator’s costs and affect its profitability

Holiday companies use a number of mechanisms to try and reduce the impacts of these situations

They can pay for foreign currency and commodities in advance when rates are favourable and sometimes pass the extra costs on to travellers in the form of extra taxes and duties, e.g. in the form of an aircraft fuel surcharge or holiday supplement

Economic factorsEconomic factors

Tour operating companies have to keep abreast of social changes and adapt their products to reflect a changing society

The fact that people are generally living longer, are choosing to have children later in life (or not have children at all), changes in the composition of families, working methods and the home/life balance, all impact on the products and services that tour operators offer their customers

Social factorsSocial factors

The travel and tourism industry has always been at the forefront of new technological developments

The dramatic growth in the use of the internet for researching and booking holidays is having a major impact on the way that tour operators sell their holidays

Trends such as the rise in ‘dynamic packaging’ and the computerised reservation systems (CRS) used by travel agents are changing the way that tour operators work

Technological factorsTechnological factors

1. Dynamic packaging

2. Distribution channels and integration

3. Budget airlines

4. Maintaining market share

5. Trend towards independent travel

Challenges to tour operatorsChallenges to tour operators

Dynamic packagingDynamic packaging

‘Dynamic packaging’ is when travellers use the internet to research their holidays and make their own travel arrangements direct with airlines, hotels, car hire companies, etc.

It offers people greater flexibility than buying standard holidays from a travel agency and can sometimes work out cheaper as well

Traditionally, a person would visit their local travel agency to get advice and book their holiday. This, of course, still happens up and down the country, but travellers are increasingly using the internet to research their holidays and make their own bookings

Travel companies become integrated to improve their competitive position in the marketplace and increase their market share by having more control and benefiting from ‘economies of scale’, e.g. when a travel agency and tour operator are owned by the same organisation, company functions such as purchasing, finance and human resource management can be carried out by fewer staff, thereby reducing costs

Distribution channels and integrationDistribution channels and integration

Budget airlines are having important impacts on the work of tour operators, some positive and some negative

On the positive side, tour operators are able to use the network of routes offered by the budget airlines when developing their holidays, thereby offering a greater variety of destinations at reduced prices

The negative impact is to do with the fact that travellers are using the low-cost airlines to put together their own holidays – dynamic packaging – by-passing the need for a tour operator’s services

Budget airlinesBudget airlines

Tour operators try to maintain or even increase their market share in a number of ways:

Through mergers and takeovers – buying a competitor company that offers similar holidays will immediately increase market share and reduce competition

By reducing prices – this can increase business and is often used when new companies start up

Increasing promotion – can raise awareness of a tour operator and lead to increased sales

Improving quality – this can improve customer satisfaction and increase repeat business and recommendations to friends/family

Training staff – allows tour operators to improve customer service

Maintaining market shareMaintaining market share

Trend towards independent travelTrend towards independent travel

1. Outbound – companies that offer holidays for British people travelling abroad

2. Inbound – tour operators that service the needs of overseas visitors to the UK

3. Domestic – companies that develop and sell holidays in Britain

4. Independent – tour operators that are not part of a large, integrated travel company

5. Specialist – holiday companies that specialise in a particular type of holiday or destination, for example golfing trips or expeditions to the Himalayas

Categories of tour operatorCategories of tour operator

Outbound tour operators develop and sell holidays for British people wanting to travel abroad

Some are very big companies that sell millions of holidays every year, the so-called ‘mass-market’ tour operators, while others are small and medium-sized enterprises (SMEs) employing just a few people

TUI UK/Thomson and Thomas Cook are the UK’s biggest outbound tour operators – together they arrange around 11 million package holidays every year

Outbound tour operatorsOutbound tour operators

Inbound, or incoming, UK tourism is concerned with meeting the needs of the increasing numbers of overseas visitors who choose to visit Britain

Just as we might visit a travel agency to book our annual overseas holiday or business trip abroad, many overseas visitors do the same in their own country when they want to come to Britain

A travel agent in the USA, for example, who has a client wanting to spend a week in Scotland, has to contact a tour operator to make all the arrangements

Many incoming tour operators in the UK are members of UKinbound

Inbound tour operatorsInbound tour operators

Domestic tour operators are companies that specialise in holidays in the UK for British people

They offer a very wide range of holiday products, from packages in holiday centres such as Center Parcs and Butlins, to coach holidays in all parts of Britain

Many domestic tour operators deal directly with their customers rather than selling through travel agents

Domestic tour operatorsDomestic tour operators

Independent tour operators are usually small businesses that are not part of larger, integrated companies, such as TUI Travel and Thomas Cook

Because of their size and the experience of their staff, independent tour operators are often able to provide a more personalised service to their customers

Successful independent tour operators are sometimes taken over by larger travel firms, which are looking to expand their operations and reduce competition in the marketplace

Independent tour operatorsIndependent tour operators

There is a growing demand for specialist tour operators from a travelling public that is looking for something more than the mass-market companies offer

There are literally hundreds of specialist tour operators in the UK travel and tourism industry

Many specialist operators join the Association of Independent Tour Operators (AITO) to help their businesses grow and to develop the interests of the sector

Specialist tour operatorsSpecialist tour operators

Tour operators’ productsTour operators’ products

Package holidaysPackage holidays

Tailor-made travel arrangements involve designing all aspects of a customer’s holiday on an individual basis rather than selling a ready-assembled package holiday

The customer benefits by getting a holiday that is individually tailored to their needs, but it does mean more work for the tour operator

This type of arrangement is growing in popularity as more people seek out holidays and destinations that offer something different

Tailor-made holidaysTailor-made holidays

Developments in aircraft technology and reductions in prices have opened up new, long-haul destinations, including Florida, the Caribbean, Brazil, Mexico, Dubai, the Far East, Australia and New Zealand

The introduction of ‘all-inclusive’ hotels and resorts, have given visitors greater holiday choices

High-speed rail services, that cut travel times between major cities, continue to be developed across the world

The growth of low-cost airlines, firstly in the USA and Europe but now spreading to India and Asia, is having a considerable impact on travel patterns and the development of new holiday destinations

Destination, accommodation and transport options

Destination, accommodation and transport options

The very competitive nature of the tour operations sector means that profit margins on holidays are often very low (and sometimes non-existent!)

This means that tour operators look for ways of supplementing their income through sales of ancillary products and services, either in-resort or before their clients travel

The income they make on the sale of add-ons, such as car hire, excursions and travel insurance, can be greater than the profit margin on a holiday, so they are very important to the company

Ancillary products and services Ancillary products and services

A ‘target market’ refers to the customers that a tour operator is trying to attract to buy its holidays.

Typical target markets for which tour operators develop holidays include:

• Singles• Families• Couples without children• Groups• Special interest market• Business travellers• Youth market• Activity market• Senior market

A tour operator may concentrate on a single target market or develop holidays that appeal to a variety of customers

Target markets Target markets

There are four key elements to planning a package holiday programme:

1. Research and product development2. Contracting3. Costing and pricing4. Brochure production

Planning a package holiday programme

Planning a package holiday programme

A great deal of background research is carried out to make sure that tour operators' products have the best chance of meeting their sales potential. Sources of market research data available to help tour operators with this process include:

• Internal sales data• External sales data • Analysis of competitors' programmes • Market research reports • Government data • Analysis of customer satisfaction questionnaires • Financial analysis

Research and product development Research and product development

There are three main types of contracts used in tour operating:

1. Commitment/guarantee – where the tour operator guarantees to pay for a certain number of bed spaces

2. Allocation and release back – where the tour operator agrees an allocation of a certain number of bed spaces with the hotel and agrees to give back any that it has not sold by a certain date

3. Ad hoc – this is the most flexible arrangement, when a tour operator agrees a contract (discounted) rate with a hotelier and makes bookings as and when required

Negotiations on contract terms usually start a year before the holidays are sold

Contracting Contracting

Cost‑based pricing involves calculating all the fixed and variable costs of a tour product, including any commission payments to agents, and setting the price at a level which covers all these costs and allows a profit margin

Sometimes referred to as 'what the market will bear', market‑based pricing sets pricing in a wider context by taking account of what competitors are charging when determining prices

Costing and pricing Costing and pricing

Brochure production Brochure production

Tour operators can sell their holidays through a variety of distribution channels, including:

• High street travel agents• Online travel companies, e.g. Expedia, lastminute.com, etc.• Direct to customers via the internet, telephone, television and

brochures• In conjunction with newspapers and magazines

Selling direct to customers tends to offer a higher profit margin for the tour operator, since there are no agents or ‘middle men’ to pay

Selling package holidays Selling package holidays

Tour operators must promote their products well if they are to reach their sales targets

In large tour operating companies, marketing department staff plan and co‑ordinate a range of promotional activities including advertising in newspapers, magazines, on the internet and Teletext, direct mail, product launches, sponsorship and sales promotion, to ensure that the operators' products are given maximum exposure

Sales promotions Sales promotions

Reservations Reservations

Most tour operators, whether large or small, use computerised reservation systems to process bookings, offer alternatives if a first choice of holiday is not available and generate the paperwork associated with a sale

With the growth in the use of the internet for online bookings, which are often confirmed electronically, many reservations staff are now found in call centres, handling high volumes of ‘phone calls from agents and the public

• The tour operator’s administration department is responsible for producing invoices, receiving payments and issuing tickets and other documentation

• Staff also produce passenger lists, known as manifests, for distribution to airlines, hoteliers, ground handling agents and resort representatives, plus carry out the full range of everyday administrative duties associated with the operation of a commercial concern

Administration Administration

As well as being responsible for researching, planning, costing, promoting and selling package tour programmes, UK-based tour operations staff have a number of important duties to perform to ensure that holidays run as smoothly as possible, including:

Managing changes – to travel arrangements and bookings, e.g. overbooking, cancellations, errors, name changes, flight/coach transfers, consolidations (when a flight is cancelled and its passengers are transferred to another), etc.

Duty office – this is the main link between resorts and UK operations, manned 24 hours a day in case of problems. In extreme cases of emergency, duty office staff can charter aircraft to repatriate customers as the need arises

Customer service – handles all aspects of the customer/tour operator interface before departure, in-resort and post-holiday

Operations Operations

As well as having a general duty to provide a high standard of service to the tour operator's customers while abroad, staff in the overseas office of a major UK tour operator will have a number of specific responsibilities, including:

Checking passenger manifests (lists of customers travelling) Organising transfers to and from the accommodation and airport Selling and arranging excursions and other 'extras' such as car hire Finalising contracts with hoteliers and transport operators The well‑being, training and deployment of representatives The handling of complaints and emergencies Crisis management in the event of a major incident Ensuring health and safety procedures are followed by staff and

customers Feeding back to the UK office any formal or informal research findings

Overseas operations Overseas operations

A great deal of time and effort goes into planning a package holiday programme. Tour operators have to make decisions on:

Destinations – how many and which to include in a tour programme

Transport – what types to offer, plus which departure and arrival points to use

Accommodation – location, type, quality and quantity needed

Excursions – whether included or optional, what type to meet customer needs

Additional services – for example, travel and accommodation upgrades, insurance, car hire, airport parking, etc.

Planning a package holiday Planning a package holiday

Tour operators have to consider a number of important factors when determining the final selling price of a holiday, including:

The contracted rates that have been agreed with accommodation providers, airlines, car hire companies, transfer service providers, etc.

Seasonal adjustmentsLoad factor on the aircraft, i.e. the percentage of seats that need to

be filled before the tour operator breaks even and begins to make a profit

Fixed costsVariable costs Indirect costs, e.g. head office overheadsDirect operating costs, e.g. the cost of accommodationProfit margins

Costing a package holiday Costing a package holiday

Fixed and variable costs in tour operations

Fixed and variable costs in tour operations

Fixed Costs

• Rates• Rent or mortgage• Interest on loans• Bonding monies• Maintenance• Cleaning• Insurance• Staff salaries• Lighting and heating• Market research

Variable Costs

• Postage• Telephone, fax and internet• Computer and equipment hire• Printing and stationery• Advertising and publicity• Part‑time staff• Professional fees and charges• Bank charges• Transaction charges, e.g.

credit cards

Costing a package holiday to Corfu Costing a package holiday to Corfu

distribution channel in tourism

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