Managing Strategies at the Tour Operator Industry - Coursework Example

?Introduction Tourism has developed itself as one of the most sought after and profitable industries of the world. There are several economies aroundthe globe that have flourished because of their tourism industry. A good example that comes to mind is that of the United Arab Emirates. In the context of this report, an analysis is being conducted on how the external factors in Europe have had an effect on the tour operator industry of the region. Tour operators have become an important intermediary in the industry. They are a channel that people now prefer to go to in order to have their travel queries resolved. However, the ever evolving industry of tourism in Europe has meant that there were several factors in the external environment that were impacting the tour operators. This report will analyze those factors using the PESTEL model and Porter’s Five Forces. PESTEL Analysis Political The major political problem that struck the European tour operator industry was the September 11 attacks in the United States of America. The debacle was not just detrimental for Europe but for everywhere around the world. One of the industries that suffered most was the tourism industry. The sense of fear among people grew and that brought a big halt to the number of travelers around the world. The countries had implemented strict policies on visas and entry of foreigners in their lands. Among countries, there was increased scrutiny as the after effects of the attack on the US. There was lack of trust because of the security troubles. Every foreigner was scrutinized. Policies were made strict and this was one major reason why tourism industry took a big hit after the attack (United States, 2006). Economical The attacks did not just affect the political landscape of the world but it also had a direct impact on the economies of several regions. Businesses came to a halt and export and import was severely affected. This meant that businesses were not making as much money as they would in normal times. Because of this, there was a severe lack of profit which led to businesses running out of capital (Beaver, 2002). There were a lot of jobs lost and unemployment was on the rise. The overall spending power of the common man went low because of which the expenditures on luxuries such as traveling was also cut down. This had a direct impact on the European tourism industry because people started become more concerned about their well being rather than spending heavy and travel and leisure. An enormous decline was seen in the amount of money being spent in tourism (Hall & Lew, 2009). Matters were also made worse when the global economic crisis hit the region in the last 2000s. The world became rife of liquid money and economies were collapsing. This meant that the overall economic situation was not healthy. Companies were suffering as well with many big names being forced into shutting down their businesses. All in all, it was a tough environment to operate in for the European tourism industry. Social The positive aspect in the external environment for the European tourism industry, however, was that the people of Europe generally liked traveling. It was taken seriously and people considered it as their passion. This meant that when political and economic conditions in the region improved, people went back to investing in their travels and this was something that immensely benefited the tourism industry in Europe (Davidson, 1998). Technological Technology had a big part to play in the European tourism industry. For tour operators especially, technology was proving to be a menace. This was because their direct competitors, who would be the hotels and airlines themselves, started selling their products and services through the internet. During the last 2000s, sales through internet surpassed all other mediums. Technology provided a more convenient and easy access to people who wished to book flights and tours. Airlines as well as hotels both were now providing packaged tours for their customers, something the tour operators in Europe thrived on. They made it easy for customers to access those packages from the internet and buy it from there. Environmental As far as the environment is concerned, this aspect has minimum impact as part of the external environment for the European tourism industry. Legal The legal aspects came into play with tour operators went through mergers and acquisitions. This meant that the biggest players in the industries had now joined hands decreasing the number of players. As far as the law was concerned, the September 11 attacks in America had put in place laws and regulations that made it difficult to foreigners to move in or out of other lands. There were stricter measures taken which became a major hindrance for the tourism industry. On the whole, the situation for European tour operators had been a difficult throughout the 2000s because of the political and economic situation in the country. The spending power was affected and this had a direct impact on the tourism industry. Also, because of the security threats there were stricter laws and regulations in place which mean that people could not cross borders easily. There were laws that made it difficult for people to attain visas for their travels. Considering how visas are such an integral part of the travel industry, this was a major threat for the tourism industry. However, things have now improved and looking good for the industry. Economies have been seen moving towards stableness and betterment. Also, relationships between countries have also become better. This has meant that people now have better spending power and the visa attainment process is also easier now. Both of these aspects are major opportunities for the tour operators in the region to cash in on (Salkin, 2007). Porter’s Five Forces Threat of new entrants The tour operators in Europe had decreased in number thanks to the mergers and acquisitions that took place. Companies like Thomas Cook and TUI Travel Plc had acquired other tour operators and had taken a major chunk of the market share of the tourism industry (Evans & Elphick, 2005). With such a stronghold in the market, it was difficult for new entrants to come into the market and establish themselves. The above mentioned players had firmly established themselves and became large groups that owned several companies under their name. There were all kinds of tourism related companies operating under them which meant that they were operating as one stop solutions for the travel enthusiasts for Europe. With so much control in the market, the threat of any new entrants coming into the market was low. Even if someone managed to enter the market and start their operations, they would be of no major threat to the two existing, major players of the European tourism industry. Threat of substitute products or services The situation was, however, very different when it came to substitute products or services. The tour operators in the European region, namely Thomas Cook and TUI faced indirect competition from the direct suppliers such as airlines themselves, hotels and transport companies (Korstanje, 2007). Looking at how successfully the tour operators were selling tour packages and the inclination of customers towards buying tailored packages, the direct supplier – airlines, hotels and transporters – started offering their own versions of tour packages as well. Not only did they start that, they also began to sell over the internet making it an easier and more convenient option for the customers. This was a major threat to the established tour operators in Europe. Bargaining power of customers (buyers) The bargaining power of customers was high in this case because of the options they had available to them in the market. If they did not get good and affordable packages from the tour operators they had the option of buying them from the direct suppliers like the airlines themselves, hotels or transport companies. Bargaining power of suppliers Conversely, because there were so many options for the customers in the market to fulfill their traveling desires, the bargaining power of the suppliers – which in this case are the tour operators and their direct/indirect competitors – was low. They knew that if they do not offer quality along with affordability, customers had the option of opting for someone else in order to fulfill their traveling requirements. Intensity of competitive rivalry Even though there was no as much intense rivalry among the tour operators primarily because of the lack of major players, the rivalry was high because of the other indirect competitors in the market. The strength for tour operators was their offering of packages that were tailor made and included every aspect of a vacation. But this strength was then replicated by airlines, hotels and transporters who started offering similar packages to their customers. This meant that the overall feel in the tourism industry in Europe had become an intensely competitive one. While competition is good for the overall health of the industry, the prevailing situation meant that the players in the industry had to be on their toes to make sure they offered the best possible packages to their customers. The winner in all of this, however, was the customer who had a plethora of options to choose from. Industry Life Cycle According to the industry life cycle, the European tourism industry has been through a roller coaster ride. During the early 2000s, the industry that was still in the growing stage had suffered an immediate decline because of the attacks in the US. It took a hard and long time for the industry to recover from that debacle considering how business was affected all over the world. The visa attainment issue was also made worse which had a direct impact on the tourism industry. However, the industry had stabilized itself and was moving in the growth stage during the mid 2000s and that is when the region was hit with a major global financial crisis. The lack of liquid cash in the economy had meant that everyone who was a part of it was badly affected. There was serious lack of buying power and traveling was no longer an aspect people freely invested in. The loss of jobs and unemployment had also forced the tourism industry into decline. However, after 2009, the situation around the world improved and the industry has finally put itself in good pace and is moving from the growth stage to the maturity stage (Conrady et al, 2010). The economy is comparatively stable and spending power has gone up to. So much is now the spending in the tourism industry that it is now considering one of the most powerful industries around the world. With an overall $5474 billion being generated from the tourism industry worldwide, it has now established itself and is slowly but surely moving towards the maturity stage which will again give the players more opportunities to become innovative and come up with offerings and services that will continue reviving this extremely potential filled industry (Scheyvens & Russell, 2009). References Top of Form Top of Form Beaver, A. (2002). A Dictionary of Travel and Tourism Terminology. Wallingford: CAB International. p. 313. ISBN 0-85199-582-9. OCLC 301675778. Conrady, R., Buck, M., & Viehl, P. (2010). Trends and Issues in Global Tourism 2010. Springer. Davidson, R. (1998). Travel and tourism in Europe (No. Ed. 2). Addison Wesley Longman Ltd. Evans, N., & Elphick, S. (2005). Models of crisis management: An evaluation of their value for strategic planning in the international travel industry. International Journal of Tourism Research, 7(3), 135-150. Hall, C. M., & Lew, A. A. (2009). Understanding and managing tourism impacts: An integrated approach. Milton Park, Abingdon, Oxon: Routledge. Korstanje, M. (2007). The Origin and meaning of Tourism: Etymological study.E Review of Tourism Research. Vol 5 (5): 100-108. Texas A&M University, US Salkin, A. (2007). "'Tourism of doom' on rise - The New York Times". Nytimes.com. Retrieved 2012-10-30. Scheyvens, R., & Russell, M. (2009). Tourism and Poverty Reduction in the South Pacific. United States. (2006). State of the tourism industry one year after September 11th: : hearing before the Subcommittee on Consumer Affairs, Foreign Commerce, and Tourism of the Committee on Commerce, Science, and Transportation, United States Senate, One Hundred Seventh Congress, second session, September 25, 2002. Washington: U.S. G.P.O. Bottom of Form Bottom of Form Read More