Tourism Package Operations - Essay Example

Running Head: TOURISM PACKAGE OPERATIONS Tourism Package Operations Name Institution Date The tourism and travel industry is currently undergoing structural change due to advancement in technology and the consumer demand as the key drivers in travel retailing. However, the tour operators and retail agencies still feel that their role in the industry is very important regardless of the unavoidable changes. A tour operator buys the tourism products in large amount, puts them in attractive packages which he decides either to sell to the customer directly or use a travel agent. The operator hence becomes the controller over the package distribution and sale since in the tourism services he is an intermediary between demand and supply. For the well functioning of the market, the tour operator is essential due to: - the decisions made by producers and consumers is affected by the operator hence an impact on the evolvement of the market, and customers preferences and services reach the market and the producer through the operator who acts as the main information channel hence influencing demand and supply equilibrium. There is significant impact of online technologies on transactions, communications and relationships between the customer and the industry operators as well as between regulators and operators. The changes brought by technology include: - reduced costs for customer during searching and accessing the markets due to the ability to turn ideas for larger number of customers into marketable innovation, high speed in accessing new products in the market through internet use, sharing of information and process changes within and between institutions, and balance of power shifting due to wide range of information availability between supplier and customers. Key-telephone, mobile phone, home pc, internet access (Anite, 2004) The graph above shows the trend in the evolution of technology in the recent past years whereby there is great change with people adopting new technology hence defining the use of new models in the tourism and travel industry. For instance, between 1970 and 1980 only telephones were used compared with the period between 1998 and 2003 where telephone, mobile phone, home pc, and internet access are all used with the population using advanced technology increasing day by day. The main challenges to the tour operators is caused by the travel suppliers who sell to consumers and retail agents through direct communication and also the retail agents and the business consumers whose demand is to have direct transactions with the suppliers. These also have a negative consequence to the tour agents whereby on each ticket sold the airlines don’t consider to pay travel agents commission. Visitors in some online websites are allowed for free with multiple companies to have hotel and flight rates comparison indicating that there is no need for travel agents on the ground. A major factor which has revolutionised the industry is Information and Communication Technology (ICT) which has enabled the consumers to go direct for tourism and travel products at dynamic prices by offering real time booking. Most of the firms such as airlines, hotels, ferry operators, train companies and car hire firms are concerned with providing their inventory directly to consumers. For instance in Japan, most domestic airlines offer various special fares which are low but they actually raise their base fares estimate 15% on average (JATA, 2001). In order to avoid commissions to tour operators, these fares are offered to consumers directly. In addition to this, the carriers have introduced exclusive online fares with 30% maximum off the normal fare. Moreover, Portland Holidays was among the first companies that initiated the relationship change between the tourism industry and the public during 1980’s whereby they sold direct to the consumer leaving out the travel agent. Recently, this relationship due to the impact of information communication technologies has changed. Such technologies include worldwide web, email which ease communication and creation of a new form of distribution. However, the advanced technology especially use of internet has got benefits which include:- collaboration between tourism operators has been enhanced such as service providers and travel agencies, no longer necessary for pre arrangements with respective suppliers, holiday packages to be enabled due to web service discovery which identifies alternatives, customization and purchase of services and events to be of greater negotiation, and increased levels of interoperability with external and internal applications. Technology is used by the tour operator to have their own packaged holidays which they offer to the customers with higher profit margin than when they sale the packages through the travel agents. Consumers taste also affects the tour operator whereby the feeling of independence of the consumers while using online technology to put together their own travel plans. Moreover, the advertising agents describe the technology through understandable phrases while offering dynamic holiday packaging which is technology driven. Through these advertisements, the customers don’t look for tour operators but search for independent websites in order to plan their holidays. This process involves: - giving personal information by registering on each new site, requesting for information and waiting for a response, booking confirmation, and many payments made by credit or debit card. The online consumers usually go for websites which are not frustrating by offering poor functionality. It really challenges the tour operators whereby the consumers want to individually customize their holidays. The consumers or customers get the opportunity from information technology with the preferred functionality regardless of their destination. For example, they can offer a complete trip component may be by suggesting a three city break, accompanied by access to information which can be used to search for items such as leisure events, car hire, and air fares at a go. Also the customers prefer to shop online due to dynamic pricing. This is because of fluctuation of supply and demand equilibrium hence the customer can pick up a bargain. The agent’s revenue is declining as the Airlines offer them reduced commissions when they try to reduce the cost of their services to the clients. For instance, the agents are forced to lower their charges due to reduced Airline cost offered. However, the Airlines counteract their intentions by reducing the commissions paid to them such that if they reduced the cost, they would suffer a loss. This makes them maintain a higher cost of services hence discouraging some clients from using their services. In addition, the cost of utilizing IT is on the increase thus increasing their operation cost. Though the use of IT offers a more efficient means of offering services, the agents are not in a position to utilize it due to the cost involved. This has resulted to the consolidation and closure of some travel agencies (Ndumu, 1998). Emerging large travel agencies are a major challenge to the small agencies. These agencies co-work with corporate bodies to offer services to them since they have the market power and well organized negotiation strategies. As a result, the remaining market size for competition is reduced forcing small agencies to close down. These large agencies can effort the use of IT services and are thus preferred by the majority. The use of travel agents is categorized under traditional patterns. It has, since 1980s, been challenged by direct selling whereby tour companies, such as Portland Holidays, began changing their relationship with their customers through introduction and use of direct sales thus eliminating the travel agents. This challenge has been worsened by ICT which has made it easy for customers to assess the services with only a click of a button from their homes. Tour operators have, therefore, to modify their services in order to march up with the changes. The various ways, through which the tour operators improving their services include, Upgrading to e-travel agents so as to ensure that they are up to their customers’ standards thus capturing as many customers as possible. Compiling packages from different suppliers which are competitive and dynamic so as to ensure that the customers have a variety of offers to choose from, thus making an informed and quality choice. This might include directing clients to all the best options available. The tour operators are also consolidating into one instead of working independently in order to increase their marketing power, thus maximizing on their chances of winning customers and increasing their bargaining power. Tour operators can also shifting from being located in a single office and increase the number of branch office. This will ensure that their customers are able to access their offices since despite the rise in online booking, research indicate that only 37% of people in US book directly online. 25-45% research online but book from the offices (Sinclair&Stable, 1997). To link up with tour operators and work out a reasonable package that has rates that appeal to the customer to ensure that the keep up with the rates that are being offered in directs offers being made by various companies via the internet, which are pushing the operators and agents out of the tourism industry. Increase their package range so as to march up the competition coming from companies that are web-based, and which sell a variety of holiday packages to the customers over the internet thus attracting more customers. They also have to place themselves strategically on the internet in such a way that as customers search for what they want; they are able to spot the packages being offered by the tour operators. This will be easily achieved through treating search engines as the mail channel of distribution of their services. In addition, they should package themselves attractively so as to ensure they capture the attention of as many customers as possible and not just capture it but retain it through offering competitive rates. Moreover, the travel agent and the tour operator can merge to ensure that they unite their forces and are able to package themselves better and reach to the customer together in order to compete with the rates being offered by the tour companies. By merging, they will reduce the charges since the commission rates will be reduced and thus will offer equal or close rates to those of the tour companies offering direct supply to the customer. Tour agents could also take advantage of the existing need for packages of specialist nature which require the services of an informed intermediate. Such services are not easy for the independent tour companies due to that demand or need of specialized knowledge of places for which the tour company may not know or may not be able to provide (Page, 2009). They also should continue and intensify their research so as to ensure that they aware of the changes in the consumer needs and cater for them. This will put them ahead of their competitors especially when their information is updated and centred on any changes on the consumer’s demands and /or interests and preferences. Moreover, they can appeal to more customers if they help identify and warn their customers of any scam thus protecting their money. The customers are cautious due to the experiences of some of hem losing their money to fake adverts. This supports the relevance of tour operators to the customers. The uniqueness of products and the simplicity or easy description of the particular products is very important. When the tour operators describe the products simply and package them attractively, they are able to stay ahead of their competitors who may find it hard to describe a whole company’s package which may be complex or difficult to describe (Cerovic, 2003) Building of social contact and trust is also very important and it is one point that the tour operators have to capitalize on. The meeting of face to face will always remain important to the customers and this means that the tour operators will always be significant. The only thing they have to do is provide their customers with information that meets their needs satisfactorily especially, leisure tourists. Finally, tour operators should create customer brand loyalty for everyone they serve by ensuring that they deliver quality services to the customers that come to them. This will ensure that their customers do not go out to seek for other service providers. Travel agents have the role of forwarding money and printing tickets as well as passing information of services in regard to cost and availabilities information brokers. Electronic booking system is less costly since there are no commissions to be paid while virtual travel agents ask for a commission for their services. The improved technology and easy access of information from the internet was expected to bring down the travel agents due to the perceived advantage of using electronic booking systems (Sinclair, 1991). According to Airline personnel, the web would present a cheaper means for the customer to access services and would also be of advantage to the Airline. The argument is that the excess amount of money that would have otherwise gone to the intermediates would add up to the income of the Airline since they have a means to reach the customers directly. One disadvantage of this method is the cost involved in making the advertisement and the time consumed by the client searching for information. Since the competition for productivity is increasing in the world today, every organization, group or individual wants to make the best of every moment. Searching for information on the offers available is time consuming and the clients sometimes opt to pay for services offered by the travel agents since they have a wide range of choices to make. In addition, the wide spread use of the internet has resulted to fake information being displayed thus misguiding the clients. Since the reliability of the internet has reduced due to increasing number of In addition, remote offices have been created hence the rise of home-based agents (Attard, 1993). These agents also are making use of the technology to make their services effective. For instance, they deliver electronic brochures to clients with accurate information on time. This has increased the speed at which agents offer services and ensure that the information is accessible to the client. Unlike the other electronic means, utilizing the services offered by the agents ensures that the information given to the client is accurate failure to which the agent is answerable. The fact that someone is responsible gives clients the satisfaction of kneeing that they will be served genuinely. The tour operators and travel agents basically rely on the spread of information to clients. The rise of web and its accessibility to many people has been seen as a process that has been aimed at bringing down travel agents (Cheyne, 2006). The use of travel agents enhances the possibility of a personal check. The client also has a variety of services from which one can make a choice depending on the place and amount of money one intends to use. One advantage of the electronic means is that to many people, they are available and easy to access. This is owed to the reduced cost of browsing that pay. Using electronic is very economical for organizations. Since travel services and products have the characteristics that support the use of electronic methods. The travel agents are more informed as compared to the websites where each company advertises its services without giving the disadvantages. This gives the client an opportunity to compare different rates as the quality of their services hence ensuring that he end up choosing the most economical and effective service or product. . As the airlines promote electronic ticketing, the cost of their services is lower enabling them to give discounts which in turn attract more customers. It is for this reasons that most Airlines are embarking on this. The travel agents give precise and clear information regarding the available services especially in the case where the client is not aware or the information is too complex for him or her to understand (Ira, 1998). For instance, a client may not search and understand on a cruise unless explained to by an agent making the agent a necessity. This helps him or her to avoid any uncertainty or prevent any pitfall. According to recent research, the electronic markets do not necessarily eliminate the use of intermediate in the purchase of travel services and products but rather create new intermediates since they are facilitated by the use of IT. Each supplier is interested in selling his or her goods and is thus biased in a way, whereas travel agents are independent and do not have their own travel services to promote thus are objective. However, the agents may some times be influenced by the commissions offered by different travel agents thus promoting that particular travel agent. In addition, travellers are likely to trust the agents since they come face to face. Using electronic booking systems would lender many people jobless thus affecting their financial stability. Electronic booking supports clients who do not want to share their information considered as private to a third party thus allowing them to use the services without disclosing the information. References Attard, J. (1993). 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