Tour Operations and

Tourism Distribution ChannelManagement

Mike Morgan

DG28

965174

mmorgan@bournemouth.ac.ukhttp://balm.bournemouth.ac.uk

The aims of the unit

• Give an overview of the role of intermediaries in the tourism sector

• apply business management approaches to the sector in a practical assignment

• provide an academic framework to convert your operational experience

• provide a basis for a dissertation

The content

• The role of intermediaries in the tourism system

• the elements of tour operations planning

• the strategies of the leading companies

• New distribution channels for tour products

• delivering customer service quality

• the future of tourism distribution

The workAssignment 1

• Group project to design a tour programme

• due 5 June

Assignment 2

• Essay set by Derek Robbins

• due 19 June

Intermediaries

• Those who come between…– Producers/manufacturers– And the end-user customer

• Independent organisations who assist the producers to make the product available to the customer

Definitions

• EU Package Holiday Directive

‘a pre-arranged combination of two or more components when sold... at an inclusive price …includes overnight accommodation’

A tour operator = the organiser of a package holiday

The role of the tour operator

• Purchase in bulk components of a holiday

• Package them into a standardised repeatable product

• Brand them into a single entity

• Offer them to the public at an inclusive price

Middleton

How does this differ from the role of the travel agent?

An agent

• Acts for a principal (the producer of the product)

• provides a service for a fee or a commission

• in British usage a travel agent is someone who sells travel and holiday packages for a commission, usually from retail shops

• This distinction is becoming blurred

Understanding the tourism system

Exercise

• You are managing a hotel in a destination

• Draw a map of the intermediaries involved in marketing your rooms to UK tourists

• How do they add value to the end-product?

• What does each party get from the interaction?

• How easy would it be to find a substitute?

The Tourism Industry

Attractions

Accommodation

Facilities

InternalTransport

InternationalTransport

Tour Operators

TravelAgents

Incoming Tour Operators‘Ground-handling agents’

Customers

National Tourist Office

What theories can help us understand how this industry works?

The value chain• Devised by Porter (1980) to analyse what happens inside

companies - where the value is added to the end product

• Applied by Kogut (1985) to the whole external supply chain

• Terpstra (2000) writes of ‘configuring the value-added chain’

- which activities to do yourself and which to pay someone else to do.

SpecialisationThe same choice faces hotels, resorts, air and sea transport.

• Where does your expertise lie?

• Where can you add most value to the product?

The Value Added ChainTerpstra and Sarathy (2000)

ManufactureAssembly RetailingDesign Components Distribution

Marketing

AccommodationAttractionsTransport‘principals’

PackageTour

BrochureReservations

Travel Agent

How does the tour operator add value?By providing the ‘principals’ with a marketing channel for their products

Marketing Channels

• Sets of inter-dependent organisations involved in making a product available to the end-user customer (Stern and El Ansary 1996)

• Carry not only flows of product but information, promotion, payment and ownership

• Offer the suppliers ‘contactual efficiency’ in reaching the end customer (Rosenbloom1995)

• Make the product available in the ‘utilities’ of form, time and place required by the customer (Bucklin)

• require members to subordinate their own needs to the success of the channel (Stern)– issues of control and leadership, power and dependency

Hotel Tour Operator Travel Agent Customer

Network theory

• Looks at relationships, networks and interactions (Gummesson 1988)

• a complex web of influences on the quality of the product (Holmund and Kock 1995)

• these influences can conflict with each other

• Competition is between ‘networks of value-delivery systems’ (Kotler 1998) rather than individual firms

Elements of a network analysisHakansson and Johanson 1992

• Resources needed to create the product

• Actors - firms, organisations involved

• Interactions - between actors to create..

• Activities that produce the product

• Relationships that develop to ensure long-term commitments

Hotel Tour Operator Travel Agent Customer

Attractions

ResortAmenities

Conferencecentres

Other hotels

Local agent

DestinationNetwork

TouristBoard

Hotel Tour Operator Travel Agent Customer

Attractions

ResortAmenities

Conferencecentres

Other hotels

Local agent

DestinationNetwork

TouristBoard

Hotel Tour Operator Travel Agent Customer

Attractions

ResortAmenities

Conferencecentres

Other hotels

Local agent

DestinationNetwork

Airline

AirlineAlliance

AirportsCar rental

Transport Network

TouristBoard

Financial services-insurancecurrency

IT systems

SupportNetwork

Hotel Tour Operator Travel Agent Customer

Attractions

ResortAmenities

Conferencecentres

Other hotels

Local agent

DestinationNetwork

Airline

AirlineAlliance

AirportsCar rental

Transport Network

TouristBoard

Financial services-insurancecurrency

IT systems

Corporateclients

Retailcentre

Management

Web portals & search engines

• Airline: Easyjet• Hotels: Hotelopia (part of the TUI group)• Car rental: Europcar (part of Volkswagen Group)• Ski Breaks: Erna Low (independent specialist tour

operator)• Chalet rental: Chaletgroup (consortium of chalet owners)• Skiwear: BornForSports (community marketplace for

sportswear)• Travel Insurance: Mondial Assistance (part of Allianz

Group)• To/from the airport: Holidaytaxis• Airport parking: NCP• Travel guides: Arrivalguide.com in association with

Fastcheck AB

Easyjet’s Affiliate Network (2008)

Formalising the relationship

• Vertical marketing systems – Star Alliance

• administrative – consortia – Best Western

• contractual - franchises, joint ventures - Opodo

• corporate - vertically-integrated companies eg Thomson/TUI

Systems theory (see Laws)

• Based on biological, ecological systems

• each component is affected by and in turn affects the behaviour of the others

• inputs, processes and outputs

• organic growth

optimum size and efficiency

decline and decayIncludes interaction between tourism

and the host society and environment

Weather &Climate change

Destinationenvironment

DestinationEconomy

Fears of crime& terrorism

New technologiesInvestment & changes of ownership

Economies of originating countries

ChangingLifestylesdemographics

Mediainfluences

Changes in regulation

Attractions

Accommodation

Facilities

InternalTransport

InternationalTransport

Tour Operators

TravelAgents

Incoming Tour Operators‘Ground-handling agents’

Customers

National Tourist Office

How are these changing the system?

UK holidays abroad 1999-2005(UK International Passenger Survey)

05,000

10,00015,00020,00025,00030,00035,00040,00045,00050,000

yr1999 yr2000 yr2001 yr2002 yr2003 yr2004 yr 2005

Holidays

Inclusive

Independent

Inter-organisational relationshipsWhat each model reveals

• Inter-dependent channel members – efficiency

• Value-adding chains - value, profit

• Complex and conflicting networks– understanding, trust

• Organic and evolving systems– flexibility, responsiveness