Size, Structure and Trends in the Tour Business - Assignment Example

Tour Guide in Tourism Industry Size, Structure and trends in the tour business The business of tour operator involves sellingof transport, accommodation, activities and transfers in an all-inclusive manner. The products of the business are very different from those of other businesses in a number of ways. Tour business involves the selling of intangible products that are bought without being seen or touched and can only be known by the consumer after use. As such, tour operators have created a way of selling their products through the use of brochures that may not accurately provide the impression of the feelings of particular consumers after the consumption of the product (Osterwalder, 2009). It involves the selling of a discretionary product which may not be bought by the clients in situations of financial hardships unlike fuel and food stuffs. The products in this nature are heterogeneous and perishable since they best sell only up to the time of departures. Those that are packaged are often inseparable. However, the tour industry is in most cases highly structured with high degrees of specialization in the businesses within it in functions that are driven by the core business. Its structure is largely a function of consumers travel abilities and their selection of travel products that they choose to buy. The travel industry is structured into different forms including; inbound and outbound which refer to offering services to clients from other regions as well as serving clients from the same regions. Short haul and long haul; referring to the type of a market that a client comes from whether near or far away. Operators and resellers; referring to whether the company is moving its own products or the products of others in the market by either taking a commission or charging a mark up. Package Travel, Group Travel, and Independent Travelers; Involves selling the services in a package, this may be spread into package holidays for the group travelers, or personal travelling for certain clients who do not prefer group travel. It is further structured into travel operators which include; travel agencies, outbound tour operators, ground operators, local service providers and travel resellers and portals (Osterwalder, 2009). Tourism industry is one of the leading employment creation world-wide and is among the top-five leading industries in terms of employment creation. It provides a broad scope of support to businesses and service provision across the industry sector. In many countries in Europe and America, tourism business is mainly small to medium in size. Irrespective of size, tourism business is characterized with a lot of challenges that range from developing it, managing, operating and growing it in a highly competitive environment which is rapidly changing and volatile. With the recovery of the global economy after the financial downturn that was witnessed, the unemployment figures in US and UK have gone down remarkably since 2009. The travel industry has reaped benefits from such trends. In the year 2012, over one billion global trips took place according to the United Nations World Tourism Organization. It was further estimated that this increased with over 4% in the year 2013 as approximately 500 million global trips took place only in the first half of the year. In the same year travel industries projected an incremental profitability for the following year 2014 as a result of increased tour travels by the tourists. Furthermore, a research study conducted by the World Travel Market Industry has shown that senior executives in the travel industry have polled prospects of increased profitability in the industry as a whole in 2014. They agreed to the fact that their businesses had experienced an upsurge in demand for different products in the initial months of the year 2014. However, there are some hurdles that the industry is still facing such as the negative impacts being caused by both the national and international conflicts (Osterwalder, 2009). Increment in taxation in the industry is another hindering factor to the positive grains that have been made in the industry. There has been an increase in taxation on the outbound flights especially in UK. These are also coupled with visa regulations and travel advisories which have affected the business by up to 14% in 2014. Overally there has been an increased optimism in the industry due to the improvements that have been seen in the global economy. The European Tour Operators Association thought that there would be a tourism dip in London after having held a world event. It was rather different as the recent trends have recorded an increase in demand derived from the holidaymakers that has increased the city’s capacity. Technology in the Tour Industry Information technology has become part of all the operations and strategic management of a business entity. In modern tourism sector, information technology has become part of the lifeline for growth and development. It provides the industry with both eminent challenges and opportunity that when looked at objectively can be used to strengthen the business of tour travel in tourism. Irrespective of the challenges so far experienced in the adoption process of IT in the tourism sector, the trends of change have forced the organizations to compute in order to improve its competitiveness through the use of emerging competitive and innovative methods of management. Failure of technological adoption in modern tourism business would lead to the endangering of the current industry players by the exogenous ones. The survival in the competitive industry today depends on the creativity and innovative supply of tourism products. Development in the IT has initiated a revolution in enterprises and economies. It has made different business activities easy in terms of acquisition, storage, processing analysis, retrieval and dissemination of information for use (Osterwalder, 2009). At the international level, it forms an important part in the development of regions through the determination of their competitiveness in the global market arena. While at the local level, it is instrumental operational and strategic managements that increase the competitiveness of an enterprise in an industry. Inevitably, the tour guide business has been affected by the revolution in technology. An enterprise has to become flexible, accessible, specialized, and interactive in order to satisfy the demands of the modern sophisticated and knowledgeable consumer in the market. Due to the nature of the intangible tourism services which cannot be displayed for inspection before sale, these services depend upon descriptions and representations that are being provided by the travel trade in order to attract consumers. As such, there has been need for reliable, timely and accurate information relevant to the needs of the target consumers as a key to satisfaction of the demand for tourists. Such an information backbone is provided by IT for the facilitation of tourism. Information technology has provided a revolutionized management strategies in the tourism industry. It has enabled an efficient industry co-operation the provision of tools for globalization. The rapid growth in the demand and supply has increased the benefits of IT as an important element in tourism marketing, promotion, distribution and co-ordination. As such, IT has had a dramatic impact in the travel industry by forcing the players in the sector to adopt strategies the organization of their businesses in terms of values and norms of behavior and response to the market (Osterwalder, 2009). Research on the impacts of IT on the contemporary travel industry has found that “the key to success lies in the quick identification of consumer needs and in reaching potential clients with comprehensive, personalized and up-to-date information.” In order to manage the rapid growth in volume and quality requirements of a modern tourist, there is need for the use of a powerful technology in the administration and assessment of the expanding tourism. Contemporary tourists have become highly sophisticated with an increased demand of high quality products and value for their money. As such, the travel industry needs the adoption of new methods in meeting these new demands. Technological application in the industry is a function of both the increase in the size and complexity of demand in the modern tourism industry together with the increasing expansion and sophistication of the products in the mini-markets of tourism. There has been a rapid demand for information by the new crop of travelers on the more exotic destinations with peculiar experiences that would bring the satisfaction of their needs and wishes. The modern consumer is not prepared to be caught up in situations delays that results to the point where “patience is a disappearing virtue.” As a result, incorporation of technology in the tourism is the only sure means of ensuring satisfaction of the clients demand. IT enables the clients to access information that is reliable and accurate in order to take reservations within the shortest time possible hence increasing certainty without despair. Technology improves the service quality with a contribution to high client satisfaction in the industry. In the travel industry, client satisfaction is dependent on comprehensiveness and precision of information on destination’s facilities, accessibility, activities and attractions. Currently, since the proliferation of internet in 1995, consumers have relied on internet as the of travel information. The internet sites are currently being used for searching, planning, purchasing and adjusting the travelling schedules. AS a result, technological impacts on tour travel has been evident on the production, distribution, marketing and operational duties for the public and private sector (Osterwalder, 2009). Business Models in the Tour Guide The Dutch tour operator is one of the companies of interests focusing mainly on long haul markets of tour travel. It offers flexible long haul vacation products sold mainly through external travel agents. Its cutting edge involves the provision of high service to the travel agents that ensure the return of value for money for the clients. Its major areas of operation in the market involve the marketing and publishing, sales and service, purchasing and packaging as well as internal handling. Purchasing in the tour travel business entails the acquisition of transport and accommodations components. The major partners of importance in the purchasing business involve the large hotel agents, large car rental companies and a selection of major airlines. In the processes of operations with a number of smaller partners, volume bonuses are negotiated and the delivery agreements are made. In the purchasing processes, the individual tour components are packaged into travel packages including plane tickets, reservations in the hotel and transportation from the airport to the hotel. Marketing and publishing entails the development of travel brochures which the Dutch travel company produces every year. The brochures are then distributed and promoted with the travel products to the travel agents associated. Its successes are contributed by an internal handling of requested quotations. The process forms an important part of the selling points which are very unique in the company even though it is time consuming. The link between the companies and the tour operators are formed through the sales and service activities (Osterwalder, 2009). The links are an important part of the business since they encourage the agents to continue the use of services in a more frequent manner hence generating more businesses. The high level of services are often associated with high costs incurred in their provision which forms the major disadvantage due to the nature of being labor intensive that may not generate margin. Maintaining high service standards and the labor intensive nature led to the model to be of loss making. The figure below underlines the reality of the happenings as a result of the business model being implemented from the year 2007 to 2010. Figure 1: Financial results case‐study tour operator 2007 2008 2009 2010 Turnover(mio) € 55 € 48 € 42 € 46 Gross margin 20,0% 20,0% 20,0% 20,0% Travel agent fee -10,0% -10,0% -10,0% -10,0% Personnel -7,0% -8,0% -7,0% -6,0% Sales and marketing -2,0% -2,0% -2,0% -2,0% General overhead -2,0% -2,0% -1,5% -1,5% EBITDA -1,0% -2,0% -0,5% 0,5% The current business model entails “customized value money long-haul holidays with a global scope and high service towards the travel agents”. It encompasses several components aimed at achieving success and efficiency in the operations of the travel industry. It makes the company to be able to conduct a product differentiation to be able to avail a wide range of products to the travel agents. Such activities that ensure value for products are underlined as shown below: Element of value: Flexibility, value for money, service and tailor made. Fulfilled needs: These involve factors such as, customization, accessibility and convenience. Product types: All-round. Differentiation: Highly differentiated. On the customer segment, the travel company focuses on long-haul. While on channels, it focuses more on packaged holidays from which travel agencies charge a fee of up to 105 for their services. The travel agents here are tasked with the creation of awareness, purchase, evaluation and delivery. In its operations, there exists no direct connection with the clients. All the necessary communications are carried out by the travel agent. On key resources, there are two main ones that can be identified; content and employees. The company employees often develop the content a part from providing the travel agents with the services they require. The content developed forms the actual products the tour operator sells. As a result, of the research on the best practices and experience gathered due to keeping of the current competitive position in the industry, the company has developed a reviewed business model which also holds a future perspective in it. The analysis has provided a range of important observations by the market experts which are best put as shown on the table below (Osterwalder, 2009) Figure 2: Critical success factors for tour operators Interview 1 Interview 2 Interview 3 Interview 4 Interview 5 -Knowledge -Knowledge -Customer orientation -Knowledge -Efficiency -Efficiency -Efficiency -CMS -Efficiency(price control) -ICT system -ICT system -Customer relationship -Channels -Channels -Local agent -Brand -Brands -CMS -Product development In conclusion, from the analysis of the success factors for tour operators from an interview of key players, it has been found that for such success to be achieved, knowledge forms the most important element. It is followed by efficiency, as this will enable to keep the operation costs to manageable levels. Customer relations were also found to be of importance in the success of the tour travel business (Osterwalder, 2009). Work Cited Osterwalder, Alexander, Yves Pigneur, 2009. 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