Agreements in the Package Holiday Industry and Market Opportunities - Essay Example

Agreements in the Package Holiday Industry and Market Opportunities Holiday tourism is gaining popularity as more and more people look for differentways to spend their holidays. Long gone are the days when package tourism was a reserve of a few rich individuals. It is now possible for anyone to travel the world, thanks, to the emergence of the package holiday industry (Ryan, 1989). There are many tourism companies in the UK which offer a wide variety of package holidays to local and international tourists. Thomas Cook, one of the largest travel operators in the UK, was the first company to offer package tours in Europe in 1841. Since then, the package holiday industry has grown by leaps and bounds. There are many operators who offer competitive packages to travelers in and out of the UK (Gratton and Richards, 1997). Package holidays are normally organized and structured by tour operators. These are the individuals or groups of people who put together different holiday elements into one package (Ryan, 1989). They then sell these packages directly to members of the public or indirectly through travel agents. Different holiday packages have different costs, depending on how they are structured. A normal package holiday may include the following: Accommodation Flights Meals Transfers Other elements of a package holiday can include: in-flight tickets, park tickets, ferry crossings and ski passes. Accommodation is normally offered by hotels or hostels in various tourism destinations. Transport is normally offered either by chartered or scheduled flight services. In the package industry, meals are normally offered on a board basis. This means that the tourist is offered meals depending on the type of board he takes up. Different types of board offered by package tour services include: Room only where there are no meals available Bed and breakfast where only breakfast is provided Half board where breakfast and an evening meal are the only meals provided Full board where the tourists can get three meals in a day: breakfast, lunch and an evening meal All or fully inclusive which normally includes three meals a day, soft drinks, snacks and locally available alcoholic drinks. In the past transfers used to part and parcel of holiday tour packages. However, nowadays, most travel operators omit transfers from their packages and they instead charge it as a separate service. The rates for transfers normally depend on the destination and level of operator in the market (Evans and Stabler, 1995). Considering that package holidays contain different holiday elements, then it is accurate to state that different companies involved in traveling and tourism have to be involved in the holiday package industry. These companies could be flight companies, hotels and accommodation service providers as well as rental service providers. Different companies that deal with different aspects of the travel and tourism sector team up to provide all inclusive holiday packages to holiday makers (Ryan, 1991). Agreements These companies normally have to come to a certain level of understanding before they come up with a holiday package. For instance, a hotel or hotel chain may come to an agreement with a certain airline to offer certain holiday elements through a third party: a tour operator. The economies of scale determine the buying power of tour operators. The same economies of scale also allow the tour operators to have a considerable level of control in the sale and distribution of holiday packages to travelers (Davies and Downward, 1998). Most of the agreements in the UK package holiday industry are collusive in nature. These agreements normally depend on the homogeneity of the products or services on offer, frequency of interaction and minimal uncertainty (Ryan, 1989). This means that if companies offering different elements of holiday services think that they can work together and get maximum benefits from the collision, they normally form a kind of a merger. These kinds of mergers are what give rise to tour operators who then offer services from different companies in a single package (Sheldon, 1986). Market Segmentation Since there are different kinds of tour operators, the market is also divided according to the kind of holiday packages that they prefer. In the UK, the market is divided as follows: UK residents who tour within the country, UK residents who travel out of the country for their holidays, and non-UK tourists who tour the country (Davies and Downward, 1998). The largest tour operators in terms of market share include Thomason Travel Group Ltd, Airtours, first Choice Limited, Thomas Cook Group and Carlson Leisure (Gratton and Richards, 1997). The table below shows the market share for various travel and tour groups offering package holidays in the U.K. Group Market Share (%) Post-Merger Market Share (%) Thomson Travel Group 20 20 Airtours 13 22 First Choice 9 - Thomas Cook Group 9 10 Carlson Leisure 1 - Others (with 1% each) 48 - Source: Gratton and Richards, 1997 The UK market is both oligopolistic and competitive. This is because the market has both large companies and small ones offering the same kind of services. The big companies are the ones that are oligopolistic, as they target a certain market niche for their holiday packages. The smaller companies are competitive in that they target the people who cannot access the packages offered by the big companies (Evans and Stabler, 1995). A report by the Monopolies and Mergers Commission in the case of the merger between Horizon Travel and Thomson Travel Group showed that the UK tour market was more competitive than oligopolistic (Aguilo, E, Alergre, J and Sard, M, 2002). There are different kinds of travel agencies in the UK. There are Independent, multiples and maniples agencies all of which offer a wide range of holiday packages to different kinds of tourists (Ryan, 1991). Advantage that can be taken of the Markets Available The holiday tourism industry has greatly expanded such that it is possible for anyone to go on holiday in a destination of his choice regardless of his financial status. The package holiday option has made things better for tourists, both local and international. People do not have to book in different places while securing all they need for their dream holidays. The different players in the tourism industry have found a way to team up and offer inclusive services to tourists. This helps save time as well as money (Sheldon, 1986). Pricing Pricing is a major determinant of the success of the package holidays industry in the UK. The big tour operators have a different pricing method from the smaller operators. However, all operators price their packages depending on the market niches that they are targeting. Most of the large operators such as Thomson normally have a higher pricing on their packages as compared to other smaller operators. This is due to the kind of companies that the operators represent (Ryan, 1991). Pricing of different packages is normally dependent on supply and demand. When it is the peak season, most hotels and airlines will increase their prices, therefore, package tour operators also up their prices. The opposite is true when it is off-peak season (Davies and Downward, 1998). Offering Discounts Offering discounts on certain services is a good way of attracting the ever eager holiday makers in the UK. Nowadays, many people prefer taking long holidays in the company of their f families. This means that their expenses are normally very high as compared to individuals who travel on their own. To ensure that more families take package holidays in or out of the country, there is a need to entice them through competitive discounts (Gratton and Richards, 1997). For example, if a travel operator is offering the services of a certain hotel chain and an airline, then all the parties can come to an agreement on what kind of discount they would like to offer to their customers. The hotel can offer to reduce its room service cost while the airline reduces its flight costs. The tour operator can then combine the reductions and offer them as discounts for the whole package. More people are likely to flock to the tour operator who offers the most competitive discounts rather than the one whose prices are always constant (Evans and Stabler, 1995). Conclusion The package holiday industry has totally changed the operations of the tourism sector. More people can now enjoy the holidays of their dreams thanks to the offers made available by tour operators. The package holidays enable holiday makers to access different elements of their holiday through a single service provider. This means that people no longer have waste their precious time booking airlines, hotel rooms and looking for restaurants since they can get all these at once. Package holiday stakeholders who include hotels, restaurants, airlines and accommodation service providers normally come to certain kinds of agreements that make it possible for them to offer all their services together through authorized tour operators. The UK tourism market is a vibrant one, and many industry players are looking for ways to tap intpo this market and increase their profits. Different industry players make agreements with other industry players so as to get as many people as possible to use their services while on holiday. The kind of agreements made normally vary depending on the niche market. Companies such as the Thomson Travel Group, who target the high income earners who travel abroad for their holidays, have made agreements with some world class hotels and airline services in various parts of the world where UK residents like visiting. These agreements include airline services, meals as well as accommodation. Apart from making agreements with strategic partners, industry players in the package holiday sector are constantly improvising new ways of retaining and getting more customers. Various discounts and other offers are normally made by tour operators on behalf of their clients who could be hotels or airlines. These discounts are meant to encourage more people to book package holiday as opposed to the traditional type of holidays. Although the discounts vary from one operator to another, these offers are targeted for anyone who can afford a holiday package in or out of the UK. The agreements between different market players lead to competitiveness, which leads to better holiday options for holiday makers. References Aguiló, E, Alegre, J and Sard, M. “Market structure of the German and British tour operators’ industry through the analysis of the package tour prices in the Balearic Islands”. Tourism Economics, Vol. 9, No. 1, pp. 46-72 Davies, B and Downward, P, 1998, “Competition and Contestability in the UK Package Tour Industry: Some Empirical Observations”, Working Paper, 98.3 Evans, N.G and Stabler, M.J, 1995, “A Future for the Package Tour Operator in the 21st Century”, Tourism Economics, Vol 1, No. 3, pp. 245-263 Gratton, C and Richards, G., 1997, “Structural Change in the European Package Tour Industry: UK and German Comparisons”, Tourism Economics, Vol. 3, No. 3, pp. 213-226 Ryan, C, 1989, “Trends Past and Present in the Package Holiday Industry”, The Service Industries Journal, Vol. 9, No. 1, pp. 61-78 Ryan, C, 1991, “UK Package Holiday Industry”, Tourism Management, Vol. 12, No. 1, pp. 76-77 Sheldon, P.J, 1986, “The Tour Operator Industry: An Analysis”, Annals of Tourism Research, Vol. 13, pp349 – 365 Read More