The Role of Tour Operators in the Tourism Industry

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The tourism industry

Introduction

The tourism industry has become a lucrative industry supporting many economies in the countries of the world. Tour operators have found a thriving business in this industry. Advanced English Dictionary defines tour operator as a company that sells package holidays. English Cobuild Dictionary defines a tour operator as a company in which your accommodation is booked.

Therefore, a tour operator can be defined as a person or company that organizes and provides holidays for tourists. Tourists are able to have their travels destinations worked out for them; accommodation booked as well as has their transport back and forth their various destinations organized by these companies.

The role of the tour operator

The role of a tour operator in the tourism industry cannot be overemphasized. They ease the process of travelling for travelers by providing essential and convenient packages that make travelling an enjoyable activity rather than a taxing one that drains one’s energy making travelling a dreadful activity.

The tour operator diminishes the transaction cost by performing a number of functions. First, they facilitate tight coordination among several components of the package tour (Calveras, 2006). By coordinating this package, the work of the traveler is reduced a great deal. It is difficult to imagine having to take care of accommodation, travelling means, and looking for destinations in a country that one is a foreigner. In addition, even if one is not a foreigner, the task of working out all these will be a daunting one and will therefore require many days of arrangement for tourists. The tour operator removes these hurdles by coordinating these services in one package. The tour operator negotiates with hotels, transportation companies, and other suppliers (Sheldon, 1986). In this case, they package the product as one to the tourist.

Second, by doing this, they reduce costs for potential tourists (Calveras, 2006). If the tourist had to make all these arrangements alone without the tour operator, they would have to pay for the cost of preparing for their travel. This is because they will have to make prior visits to areas where they will get accommodation and organize for travel to their various destinations. This is done not forgetting the fact that they have to go through the hassle of locating these destinations themselves, among other things. This will of course come with a cost implication.

Third, the tour operator provides credible information on the true quality of the tourist product (Calveras, 2006). The tour operator will in no way be knowledgeable of the tourist packages available for the tourist. This will help the tourist make wise choices concerning his/her travel.

Vertical integration and horizontal integration

Vertical integration means expanding a business at different points, which are on the same business path. For instance, in the tourism industry, an investor in the industry can invest in transportation, hotels and operating tourist destination sites. By doing this, the investor will maximize on the profits while at the same time reducing costs of operating the business.

Horizontal integration on the other hand means owning businesses, which are on the same level. For instance, a tour operator may own a transport company in the tourism sector and another company dealing with transport in another area. This has the advantage of increasing the market share for the company.

Advantages and disadvantages of vertical integration

Vertical integration has several advantages. First, vertical integration helps in lowering costs. When a tour operator has invested, let us say in hotel and transport, the cost of transport need not be incurred since the same person is providing these services. Therefore, the cost of transport will be reduced drastically (Grossman & Hart, 1986).

Second, vertical integration comes with increased control. Since one has invested in almost all the areas related to the industry, s/he has the control of the business. This is because other service providers cannot dictate how s/he is going to run the business. The investor is in control of all the spheres of that business hence giving him/her absolute control of the business (ibid).

Vertical integration provides the opportunity to invest in highly specialized assets (Grossman & Hart, 1986). This gives the investor an added advantage over the competitors who provide external supply and who may not be interested in the investment. For instance, a company providing transport may not be necessarily interested in investing in vehicles customized for tourists.

This specialized investment leads to an added share in the market that leads to increased profits. This is because one is in control of all the aspects of the market and is therefore able to control the market by reduced costs and specialized assets.

However, vertical integration has its own drawbacks. One, there is the risk of reducing the flexibility of the product due to the demands of internal development that results from integrating different tasks in the work process (Grossman & Hart, 1986). This is because the company is presented with more work, which will in turn hinder more innovation. With so many spheres to deal with, the organization may not have time to improve its products through innovation.

Integrating more work has the risk of interfering with existing competencies since a new competency is being introduced (Grossman & Hart, 1986). When more work is introduced, it can lead to workers dissatisfaction, which is not good at all for the organization because it has the potential of affecting service provision to clients.

Vertical integration may also in some cases lead to increased costs resulting from bureaucratic costs arising from integrating different jobs in the same organization. This can also be through eliminating completion amongst suppliers, which could lead to low efficiencies resulting in high costs (Grossman & Hart, 1986).

Advantages and disadvantages of horizontal integration

The advantages of horizontal integration are quite a number. First, it leads to high efficiency.  This is because the company is able to yield more services or products (Farooq, 2014).

Second, there is the advantage of the economies of scale. This results from a company concentrating in producing different products in large quantities.

The disadvantages of horizontal integration are that the misfortunes of a recently acquired business may eat into the fortunes of the existing one (Farooq, 2014). Second, it can attract monopoly, which is highly restricted by some governments (ibid). Finally, larger companies are harder to handle.

Stages employed in developing a holiday

Below are the stages of developing a holiday:

1. Research – this is in order to analyze and understand the key elements associated with a particular tourist market.
2. Tour itinerary development – after the analysis of the market, the tour operator will plan an itinerary of the destinations to be visited.
3. Negotiation with tourism suppliers – depending on the nature and the size of the tour, the operator negotiates with various tour providers. These include hotels, transport providers and other service providers.
4. Costing – after negotiating with the suppliers, the tour operator then costs the package for his/her clients.
5. Evaluating finances and pricing – the tour operator then determines the exchange rates, estimates future selling prices, and sets the final tour prices.
6. Marketing the tour package – after pricing the tour operator needs to market his/her package to potential tourists.
7. Operation and execution of the tour – whatever that is planned in the tour is then executed with utmost care. This is because it is crucial to offer the tourist whatever was promised in the marketing stage.
8. Evaluation and review – the last step is evaluating the success of the tour and what needs to be improved in future (Verma, 2014).

The difference between chartered and scheduled airlines

A chartered airline is the one that operates flights that take place outside normal schedules by a hiring arrangement with a particular customer while scheduled airline is the one that operates flights on regular timetable (Spooky, 2006).

Part II

Holiday price for Copenhagen for seven days

Knowing how much it will cost you when you are travelling is very important. There are several factors to consider when doing this calculation. These include transportation cost, accommodation cost, and entry charges at various tour destinations. This is important in order to facilitate proper planning and avoid unnecessary inconvenience of lack of planning. Since traveling especially to foreign destinations is a risky venture, one cannot operate without adequate funds.

Seven-day holiday for Copenhagen

Planning decisions that had to be made in Thomas Cook brochure

The planning decisions that had to be made in designing Thomas Cook brochures are choosing the brand and choosing how to view the brochure. The other choice is determining the cost of the brochure and which material to be used. When doing this, the target has to be taken into consideration and the geographical scope of the brochure. The period is also an important factor to be considered in arriving at the final design of the brochure.

While designing the brochure, the specific client needs need to be put into consideration. This is because each client will have his/her own unique needs. The tour sector requires graphical representation of information. It is therefore pertinent to decide which pictures to use and for what purpose.

The photographs used must be a factual representation of the destination being advertised in the brochure.

The advantages of advertising using the internet

The internet age has brought a revolution in the way things are done. Advertising is one of the greatest beneficiaries of this development. Internet advertising has both advantages and disadvantages.

The advantages of internet advertising are numerous. First, it allows a wider coverage. It can reach quite a vast number of people. It is therefore ideal for businesses that have a national and international appeal. This wider reach helps internet marketers to get the advantage of a cost efficient means of advertising. Since internet is more targeted than the traditional media, audiences that are more appropriate can see the advertising message (Ingram, 2014).

Disadvantages of internet advertising

However, with its numerous advantages, internet advertising has its drawbacks. One of these drawbacks is that the tools used in internet marketing are automatically available for anyone in the world to copy. Logos, trademarks and images can be copied and used for commercial purposes despite there being legal frameworks to curtail this.

With the media being used by several people, it has meant that people have begun to be bombarded with spam mail, which they have begun to ignore. This implies that some messages might end up being ignored by target audiences thereby missing on the purpose of advertising (Ingram, 2014).

When it is necessary to use a digital brochure instead of a paper one

There are several reasons why a digital brochure is preferred over a paper brochure. When one wants to save on cost, it is necessary that one go for a digital brochure. This is because digital brochures save cost on distribution in both printing and postage. Digital brochures also increase market reach. This is because they are available on a click of a mouse button. They therefore have a global reach and their distribution is therefore not limited.

Another benefit of digital brochures is that one can even include a video unlike in a paper brochure. This has the added advantage of enhancing the impact of the brochure.

In terms of response, it is possible to promptly respond to customers queries more quickly when one is using digital brochures than when using paper ones.

Its convenience in that it can be accessed everywhere there is internet connectivity also makes digital brochures preferable to paper based ones. They can be accessed both day and night.

They are also flexible to use. This is because one can easily change the content any time unlike paper brochures which have to be reprinted incase additional information is thought appropriate.

The other advantage of using digital brochures is that it can cover a wider geographical region than paper based ones. This means that a wide range of clients can be targeted in this advertising. The content can therefore be made to meet the tastes of a wider category of audiences. This has the implication that in the end, digital brochures will be more effective than paper based ones.

Pricing strategies

There are several pricing strategies at the disposal of an investor. The following two pricing strategies can be used.

1. Premium pricing strategy

In this strategy, the investor establishes higher prices than the competitors do. It is suitable when the product is unique or is entering the market for the first time and has a distinct competitive advantage (Richards 2014).

2. Economy pricing strategy

In this strategy, a company takes a low cost approach to marketing. They keep the prices low in order to attract a specific segment of the market that is very

Advantages of premium pricing strategy

With the premium, pricing strategy the company is able to make itself appear unique from its competitors. This is because the company charges more than the competitors charge and can therefore offer better overall working experience and thereby putting the company on an upward spiral improvement (Varjan, 2012).

For this reason, the company can offer higher quality work for its clients. This is because it has instilled confidence in the customers that they can offer high quality (Varjan, 2012). Most people believe that the more costly the product the more quality it has. As a result, the high price charged enables the company to work better on quality than their competitors because the company is able to get requisite resources. This also includes the quality of service offered. Since the price offered is high, it is logical to offer the client quality service to compensate for the high price paid at least. This will also enhance customer loyalty, since the realization that they will get quality service will make them confident they have value for their money.

Premium pricing strategy also enables the company to retain high-level talents. The belief that high cost means high quality will also mean that the company will attract high talented workers. People generally like being associated with prestigious companies.

The high prices charged will also mean that there are more funds available to finance other activities in the company. For this reason, the company will be able to send its staff to best skill building programs (Varjan, 2012). It also become possible to respond to clients queries since the resources is available for such tasks.

Even though the sales might be lower, the overall profit will undoubtedly be high. This is because the high prices charged will cover the gap of high volume of sales brought about by charging low prices.

The work morale is also higher since the workers know they are working for a company that is going somewhere. As stated earlier, people like being associated with prestigious companies. They will therefore put more effort to retain their positions in the company since they would not stand the shame of being sacked from such a company.

It is also possible to focus on specific loyal clients. This means that the company would even be able to offer customized services because the company will be able to maintain a close relationship with the clients. Another benefit is that this type of loyalty is likely to attract high-end clients who like being associated with exclusive joints.

Advantages of economy pricing strategy

One is able to attract more clients who look for cheap service regardless of the quality offered. This means that one is able to attract large volumes of tourists. Most buyers go for the lowest price and therefore one is able to attract many. These large numbers can be taken advantage of to maximize on sales and thereby improving on the quality to attract even more numbers.

Unlike premium pricing, the sales will be high and therefore one will benefit from what is called economies of scale. The choice for economy pricing also means that the company is not at risk of challenges resulting from economic slump downs. This will mean that when the economy is not performing well, then the company will attract more numbers unlike those that charge higher prices.

Consumer perception is an important tool in any business. When consumers are offered a range of price options, they gravitate toward the middle of the pack -- the value priced lines. Shoppers often see the least-expensive item as cheap or of lower quality than the others do, while they tend to see luxury items as extravagant or too expensive. A value priced line assures consumers that they are making a purchase that is adequate but not overblown (Moore, 2014).

The profit margin is also important in considering a pricing strategy. When one decides to use premium pricing, the profit margin might somehow be jeopardized since clients may shy away from goods they consider extravagant. This might pose danger to the business enterprise since survival is highly dependent on profits made by a company.

Why a tour operator would offer discounting from original brochure prices and how tour operators will ensure maximum occupancy of contracted beds.

Offering discounted prices from the original brochure is important in that it will increase the numbers of the tourists one can reach. It will also help in maximizing on loyalty. This is because this will build future relationships that will ensure the tourists will return.

The choice for economy pricing also means that the company is not at risk of challenges resulting from economic slump downs. This will mean that when the economy is not performing well, then the company will attract more numbers unlike those that charge higher prices (Moore, 2014).

Tour operators can ensure maximum occupancy of contracted beds by extensive advertising. This will ensure they reach a wider scope and hence attract more people to their services. The tour operators can also offer discounted rates to attract more tourists.

Improving the quality of services offered will also help a great deal in attracting more tourists. The standards of the services offered will determine the number of people the company will attract and this will determine bed occupancy. People like good standards and therefore if high standards are maintained, then there is no doubt that many tourists will be attracted.

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