You are on page 1of 13

CHAPTER I UNIT I INTRODUCTION 1 Introduction of Tourism and Travel Industry 2 A Simple Structure of Travel Agency and Tour Operators

3 History of Travel Trade 4 Concept of Travel Agency and Tour Operation 5 Current Issues in Travel Agencies 6 Types of Tour Operators 7 Functions of Travel Agency and Tour Operation 8 Travel Agency Linkages 9 Objective of Report 10 Limitation of the Studies

1.1 INTRODUTION OF TOURISM AND TRAVEL INDUSTRY The beginning of modern tourism can be dated from the second half of the nineteenth century no one thought of compiling information on travel volume as in the twentieth century. Tourism was either insignificant or did not materially affect the life of the people. Countries did not have any passport system. A few years before the First World War, tourism became economically significant in Europe. Italy, France, Austria and Switzerland were known to receive half a million visitors annually though it was only an estimate. After the First World War, we are told that in 1929, foreign visitors to Austria were about 1 to 2 million, Italy 1.5 million and Switzerland 1.25 million. Statistical measurement of foreign visitors had started in a modest way. But it may be recalled that before World War I no country had formal immigration control as we have today. Strict immigration controls are a post-World War II phenomenon. It was only in the thirties that tourism began to be examined against the background of economic problems of European countries. The World Tourism Organization forecasts that international tourism will continue growing at the average annual rate of 4 %. By 2020 Europe will remain the most popular destination, but its share will drop from 60% in 1995 to 46%. Long-haul will grow slightly faster than intraregional travel and by 2020 its share will increase from 18% in 1995 to 24%. With the advent of e-commerce, tourism products have become one of the most traded items on the internet. Tourism products and services have been made available through intermediaries, although tourism providers (hotels, airlines, etc.) can sell their

services directly. This has put pressure on intermediaries from both on-line and traditional shops. It has been suggested there is a strong correlation between Tourism expenditure per capita and the degree to which countries play in the global context. Not only as a result of the important economic contribution of the tourism industry, but also as an indicator of the degree of confidence with which global citizens leverage the resources of the globe for the benefit of their local economies. This is why any projections of growth in tourism may serve as an indication of the relative influence that each country will exercise in the future. Definition of travel agency A business that attends to the details of transportation, itinerary and accommodations for travelers. The agency acts as a broker, bringing the buyer and seller together. They do not substitute the service providing information and access to the visitor and are the middlemen in the purchase of certain services. Definition of tourism "travel to and stay in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes not related to the exercise of an activity remunerated from within the place visited". Hunziker and Krapf, in 1941, defined tourism as "the sum of the phenomena and relationships arising from the travel and stay of non-residents, insofar as they do not lead to permanent residence and are not connected with any earning activity." In 1976, the Tourism Society of England defined it as "Tourism is the temporary, short-term movement of people to destination outside the places where they normally live and work and their activities during the stay at each destination. It includes movements for all purposes." In 1981, International Association of Scientific Experts in Tourism defined Tourism in terms of particular activities selected by choice and undertaken outside the home environment. The United Nations classified three forms of tourism in 1994 in its Recommendations on Tourism Statistics: Domestic tourism, which involves residents of the given country traveling only within this country; Inbound tourism, involving non-residents traveling in the given country; and Outbound tourism, involving residents traveling in another country. The UN also derived different categories of tourism by combining the 3 basic forms of tourism: Internal tourism, which comprises domestic tourism and inbound tourism; National tourism, which comprises domestic tourism and outbound tourism; and International tourism, which consists of inbound tourism and outbound tourism. Intrabound tourism is a term coined by the Korea Tourism Organization and widely Accepted in Korea Intrabound tourism differs from domestic tourism in that the former encompasses policymaking and implementation of national tourism policies Recently, the tourism industry has shifted from the promotion of inbound tourism to the promotion of intrabound tourism because many countries are experiencing tough competition for inbound tourists. Some national policymakers have shifted their priority to the promotion of intrabound tourism to contribute to the local economy. Examples of such campaigns include "See America" in the United States, "Malaysia Truly Asia" in Malaysia, "Get Going Canada" in

Canada, "Wow Philippines" in the Philippines, "Uniquely Singapore" in Singapore, "100% Pure New Zealand" in New Zealand and "Incredible India" in India. The World Tourism Organization reports the following ten countries as the most visited in 2007 by number of international travelers. When compared to 2006, Ukraine and Turkey entered the top ten list, surpassing Russia, Austria and Mexico. Most of the top visited countries continue to be on the European continent.

1.2 A SIMPLE STRUCTURE OF TRAVEL AGENCY AND TOUR OPARATORS 1. TRANSPORTATION ORGANIZATION Road Rail Air Sea/water 2. LODGING COMPANIES Hotel Motel Resorts Youth hostel 3. TRAVEL TRADE ORGANIZATION Travel agency Tour operation 4. RECREATION AND ENTERTAINMENT PUBLIC-PRIVATE SERVICE ORGANIZATION Health Insurance Banking

Finance Training and development Tourism and hotel education industries 5. ANCILLARY ENTERPRISES

1.3 HISTORY OF TRAVEL TRADE Wealthy people have always traveled to distant part of the world to see great buildings or other works of art, to learn new languages, to experience new culture, or to taste new cuisine. As long ago as the time of the Roman republic place such as Balance was popular coastal resort for the rich. The terms tourist and tourism were first used as official terms in 1937 by league of Nations Tourism was defined as people traveling abroad for periods ORIGINS The British company, Cox & Kings is sometimes said to be the oldest travel agent in the world, but this rests upon services that the original bank (established in 1758) supplied to its wealthy clients. However, the modern travel agent first appeared in the second half of the nineteenth century. Thomas Cook, in addition to developing the package tour, established a chain of agencies in the last quarter of the nineteenth century, in association with the Midland Railway. These not only sold their own tours to the public, but represented other tour companies. Other British pioneer agencies were Dean and Dawson, the Polytechnic Touring Association and the Co-operative Comprehensive Society Travel agencies became more commonplace with the development of commercial aviation starting in the 1920s. Originally, the agencies largely catered to middle-class customers, but the post-war boom in mass-market package holidays resulted in travel agencies on the main streets of most British towns, catering to a working class clientele looking for a cheap overseas beach holiday 1.4 CONCEPT OF TRAVEL AGENCY AND TOUR OPARATION Travel agent is a person who has full knowledge about tourist product destinations models of travel, climate, accommodation and other areas of service sector. He acts on behalf of product provider/principles and in return gets commission. Technically a travel agent is the owner or manager of an agency but other employee are responsive for advising tourist and selling package tours/individual components of travel product. However a travel agents job involves not only making sales but also gathering travel information researching travel products analyzing options and making recommendations. A travel agent may be an individual/firm or cooperation, which is commonly, knows as travel agency. An agency means office of the travel agency or origination where all travel goods and service are assembled and coordinated for the

smooth conduct of travel agency business, travel agency is one the most important organization in the tourism private sector which plays a significant and crucial role in the entire process of developing and promoting tourism in the country or at the destination. It is a travel agency which packages of processes all the attractions accesses, amenities and ancillary services of a country and presents them to the tourists. That is why travel agencies are known as image builder of a country. A prospective travel agency is one, which makes arrangement of travel tickets (Air, rail, road, and sea) travel documents (passport, visa and other required travel documents to travel) accommodation, entertainment and other related service from the principle suppliers. 1.5 CURRENT ISSUES IN TRAVEL AGENCIES In some countries, airlines have stopped giving commission to travel agencies. Therefore, travel agencies are now forced to charge a percentage premium or a standard flat fee, per sale. However, some companies still give them a set percentage for selling their product. Major tour companies can afford to do this because if they were to sell a thousand trips at a cheaper rate they still come out better than if they sell a hundred trips at a higher rate. This process benefits both parties. Other commercial operations are undertaken, especially by the larger chains. These can include the sale of in-house insurance, travel guides and timetable car rental, and the services of an onsite Bureau de change dealing in the most popular holiday currencies. The majority of travel agents have felt the need to protect themselves and their clients against the possibilities of commercial failure, either their own or a supplier. They will advertise the fact that they are bonded (posting a financial bond with an organization). In the case of a failure, the customers are guaranteed either an equivalent holiday to that which they have lost, or (if they prefer) a refund. Many British agencies (and tour companies too) are bonded with IATA for those who issue their own tickets, ATOL for those who order tickets in, or ABTA for those who sell package holidays on behalf of a tour company. A travel agent is supposed to offer impartial travel advice to the customer. However, this function almost disappeared with the mass-market package holiday, and some agency chains seemed to develop a 'holiday supermarket' concept, in which customers choose their holiday from brochures on racks and then book it from a counter. However, a variety of social and economic changes have now contrived to bring this aspect to the fore once more, particularly the advent of multiple no-frills airlines THE BOOMING TRAVEL INDUSTRY Everyone in India seems to be on the move. Almost overnight the propensity of Indians to travel within and outside the country has exploded. The growing numbers of wealthy Indians, an expanding middle class, and the boom in low cost carriers have combined to push domestic and international trips of Indians to an all time high. International outbound trips by resident nationals peaked at around 8.3 million in 2006, according to a recent report by the Pacific Asia Travel Association (PATA) and Visa International. Besides Taj Mahal, drawing a multitude of foreign tourists is India's rich cultural and

geographic diversity which offers a wide range of tourist attractions and experiences such as leisure, culture, adventure, spirituality, eco-tourism, wellness and health. International tourist arrivals to India are peaking. Over 4.43 million in 2006, up 13% from 2005 (3.92 million) and expected to touch 6 million in 2007. If one were to include NRIs visiting India, the total number of international tourist arrivals in 2007 is estimated to cross 9 million. Conde Nast Traveler, a leading travel and tourism journal has ranked India amongst the top 4 preferred holiday destinations of the world. India is ranked 5 in the Lonely Planet survey of favorite tourist destinations in 167 countries. Tourism in India is the third largest foreign exchange earner, accounting for 2.5% of GDP. It also makes a direct contribution to the economy with significant linkages to agriculture, horticulture, handicrafts and construction. The Indian aviation sector has grown significantly since its privatization. With competition lowering fares, the volume of air travelers have gone up dramatically. Aviation officials expect the number of air travelers to grow from the present 20 million a year, to over 50 million in 2010. By 2020, the number of airline passengers in India is likely to exceed that of USA. With local and international tourist's population going up, the demand for hotel rooms, across segments, has surpassed supply by leaps and bounds. Hotels across the country, in the luxury and business traveler segments, are already recording close to 100% occupancy during weekdays, with average room rates shooting up 3035% and revenue per available room (RevPAR) by 20-25%. Catering to a flourishing travel industry calls for a strong supporting eco system. Business opportunities will therefore abound for car rentals, taxis, cargo logistics, aircraft maintenance, travel agents, airport security equipment, catering services, pilot training institutes, staffing companies, airport infrastructure and related areas like on-line travel portals etc. The online travel industry grew at 126 per cent from a base of $295 million in 2005 to $796 in 2006. In 2007, it is expected to record a 66 per cent growth to be a $1,325 million industry and by 2008, will grow at 51 per cent to be a $2,004 million (around $2 billion) industry. Take for instance, tourist information portals. Today, although the online travel sector is a mere 2.2 per cent of the domestic travel market, it is set to grow from $796 million in 2006 to around $2 billion by 2008. In parallel, the Indian consumers are getting comfortable using the web and mobile to do their travel related research and planning and thereby becoming more informed buyers of travel products and services. This trend paves the way for creating new technology solutions that can capture customer interest. However, unlike in the West, most Indian consumers are not yet ready to complete their entire transactions on-line. Smart entrepreneurial companies will therefore have to find ways to contextualize Indian travel services to capture the new smart buyer who is still Indian at heart. Travel agency Commissions Most travel agencies operate on a commission-basis, meaning that compensation from the

hotel, airline, and customer is expected in form of a commission from all bookings. Most often the commission consists of a set percentage of the sale. In the United States, most airlines pay no commission at all to travel agencies. In such case, the agency adds its profit margin or service fee to the net price.

1.7 Functions of travel agency and tour operation Today, Travel Agencies have been recognised as a vital component of travel and tourism and have become an integral part of travel and tourism industry at global. They Account for more than 90% of international and 70% of domestic tourist traffic. Further, more than 60% of all travel agency revenues are derived from the business travel. Most travel agencies sell both commercial and leisure travel but there is many travel agencies which only specialize in one sector or the other. The operation of each travel agency is based on the scope of its activities and organisational size. In this chapter we will discuss the functions of a large scale travel' agency that performs all types of activities such as retail TA, whole selling and tour operations etc. The main functions of a large scale travel agency.

1. Travel Information What ever the size of a travel agency, it has to provide necessary travel information to the tourists. This task is utterly difficult and very complicated. A travel agency must give up-to-date, accurate and timely information regarding destinations, modes of travel, accommodation, sightseeing, shopping, immigration, passport, visa, custom clearance and procedure, health and security rules and about various permits required to travel in particular areas etc. Further, we can say that travel agencies are image builders of a country. Therefore, they should present an accurate picture of various tourist resources and potentials of a country to the tourists.

2. Itinerary Preparation The term tourist itinerary is used to identify the origin, destination and all the stopping points in a traveler(s) tours. It is a composition of various elements and designed after detailed study of

market. Practically, a travel agency prepares two types of itineraries (a) general itinerary (b) special-tourist-interest itinerary i.e. Delhi-Agra-Jaipur-Delhi, Pilgrimage tourists, mountain tourists, Buddhist tourists etc. Preparation of different types of itinerary is a very important, function of travel agencies/tour operators. A prospective travel agent also gives advice to intending tourists in various types of tour programmes, which they may choose for their leisure or commercial travel.

3. Airline Ticketing and Reservation A travel agency sells variety of tourism products. Airline ticketing and reservation is still a major source of revenue. Today, recognized travel agencies and tour operators issue and sell more than 90 per cent of International Air Tickets and 60 per cent of domestic tickets in India. Airline ticketing, however, is not an easy job, as the range of international Airline fares is very complex, varied and requiring complete up-to-date knowledge of various schedules and airfares of airlines worldwide. The Computerized Reservation System (CRS) has changed the entire scenario of travel industry. Today, using this system (CRS) the travel agency may serve a wide variety of clients and fulfill their needs and requirements. For preparation and issuing of airline ticket.

4. Tour Packaging and Costing A tour package is a combination of various tourism services/goods like transport, accommodation and other facilities at and en route destination. However, in reality it has only two basic components (a) travel and (b) ground services. Travel agency prepare a package keeping in view the preference of target market, which is based on different factors like modes of travel, client choice; income, age group, country and region. After the identification of target market the travel agency liaisons with service/goods providers and enters into a contract with them. The costing and pricing of tour packages depend to a large extent on the ability of a travel agent/tour operator as to how effectively he is able to negotiate with the principals. Thus, negotiation is also an important function of the travel agency. The cost of a tour is calculated on the basis of what he has negotiated with the producers. Some extra cost is added for the unforeseen/further contingencies. Thus, costing is done by adding each element of cost i.e. transport, accommodation, sight seeing, guiding, administrative and fixed expenses. For fixing the price of a tour package, one has to add some percentage of profit margin to the cost (which is based on organisation objective, pricing policy and competitiveness of the product). Once the package is formulated and priced it means that it is ready for sale. The travel

agent/tour operator needs to promote its package so that the targeted clients may come to know about it and are motivated to purchase it. Technically, this is known as marketing of tour package, which involves different methods and techniques. 5. Reservation It is a very important function of all types of travel agencies. A travel agency consistently makes linkage with accommodation sector, transport sector and other entertainment organisations to reserve rooms, and seats in the cultural programmes and transportation. However, prior to reservation, a successful travel agency must understand the needs and requirements of the individual clients. One client may demand a five star deluxe whereas another may want a two star or a one star or different types of rooms, rates, meal plans and so on. A travel agency makes a reservation for the tourists by giving complete information regarding the number of tourists, date and time of arrival, length of stay and what is required by the individual/crop. Travel agencies use different types of reservation techniques. However, today Computerized Reservation System (CRS) is widely used today worldwide to make insistent reservation. 6. Travel Insurance Some large scale travel agencies perform additional functions to serve its clients. Travel Insurance protects the traveler(s) against the personal as well-as baggage losses resulting from a wide range of travel related happenings or problems. A tourist, who purchases travel insurance (sometimes included in tour packages), receives a contract, called a policy, issued by the insurance company. The policy is based on the client(s) needs, price and type of tour etc. Travel insurance generally covers (a) personal accidents (b). Medical and related expenses (c) baggage loss and (d) trip cancellation and interruption etc. 7. Currency Services Travel agencies/tour operators which are permitted by the RBI and Foreign Exchange Management Act. 1973 (FEMA) to deal with Foreign Currency, offer currency services (currency, traveler cheque and other documents) to the intending clients. This is a very important facility to the tourists as it saves their time and energy. However, for this the travel agencies charge certain percentage of commission. 8. Organisation of Conference/Convention Today, organizing conferences conventions and seminars have become a profitable business for many travel agencies. Even in some large scale travel agencies we find separate convention and conference departments to perform this vital function. Whenever, a commercial organisation desires to hold a conference/convention to discuss the future plans and strategies of undertaking or to conduct seminars/training programmes for its employees or to introduce new product in the market and so on, it contacts the travel agency and asks for the recommendation of suitable destinations/ venues where such services and facilities are available. Many travel

agencies (Cox and Kings, TCI, Thomas Cook and Sons) offer a complete convention/conference package including registration of participants at the venue to be picked up for dropped to the airport/ hotel, overhead projectors, slide projectors, TV, VCR, information counter, sight seeing etc. The company(s) executive is always available on the venue during the conference/ seminar period to ensure rapid and quality services. Technically, when national or international events are announced every travel agency tries to collect all the relevant details on the events such as date, duration, place and other formalities. Once the agency knows about these facts it works out a package plan. Generally a Conference/Convention Package includes Travel to and from the venue; Accommodation at the venue; Registration fees and facilities; Conference room with audio-visual devices and other services; Secretarial services; Sight seeing and cultural entertainment, and Shopping.

9. Travel Agency as Handling Agency/Ground Operator Industry experience has shown that the reputation, efficiency and profitability of the travel company (Indian or foreign) in its own tourist market largely depends on the performance of its ground operators. A handling agency may be an individual, a firm or a company making ground arrangement on behalf of another travel company. Today, the Indian large scale travel agencies acting as ground operators, for foreign tour companies are TCI, SOTC, Orbit and Thomas Cook etc., 1.8 TRAVEL AGENCE LINKAGES Basically a travel agency several two types of clients: business travelers and leisure travelers. Incidentally the requirements of these tourists are different and an agency has to assemble or purchase related component from the Principle supplies to cater their needs. Essentially travel agencies maintain close ties with the airlines hotels car rentals blank insurance Companies', railways government trade association foreign tour operator and travel agents ground operator cruise companies and tourism education Institutes. a) Airlines International Air Transport Association operates a network by which travel agencies sell airline tickets and receives Commission thus the sale of airline tickets is highly regulated and strictly controlled. The agency commission range from 5 to 11 percent but most major airlines offer additional incentives i.e. cash bonuses and over ride commission. However in some cases when a travel agency purchases air tickets in bulk the margin of commission will be high. This largely depends on relationship between the two organizations. The producer of sale of domestic airline

tickets is different from country- to country and even the rate of commission also varies. Today airline ticketing and reservation is almost entirely automated. b) Accommodation Companies Most hotels and other lodging companies including major Indian and international hotel chains pay commission to the travel agencies, (the rate varies from hotel to hotel) however hoteliers in dealing with travel agencies are more information and less regulated than the airline companies Interestingly many hotel and hotel chains participates in computer reservation system permitting hotel reservation to be made at the same terminal, which is used to sell airline tickets. The commission received from hotels is the second largest component of total agency revenue. But if the purchase is made in bulk than the profit is based on the negotiated prices and accordingly the profit may be higher or lower. C) Cruise Companies The cruise companies are informally regulated by its Own governing body i.e. cruise lines association which must approve any travel agency that. Desires to sell booking on behalf of any member of a cruise company the raise companies also offer a complete package including sea travel accommodation food entertainment and sometime air travel also. The commission varies room 10 to 20 percent. However most cruise package tour are sold to the public through travel agencies. It was Thomas cook who brought first group of foreign tourist in India through sea rout. d) Insurance Companies Today many travel companies have included travel insurance in their package tour like Thomas cooks. The company insured the travelers to protect them against accident, loss of baggage and missing flights. Successful travel agency management has to make close contact with Insurance companies to obtain insurance polices for its clients. Recently the Oriental Insurance Company has introduced two new travel policies for domestic as well foreign tourist i.e. 'Suhana Safar' for domestic travelers And 'Videsh Yatra Mitra' for foreign travelers. Incidentally the foreign policy is an upgraded version of overseas medical insurance. e) Banking Companies Travel agencies offer banking facilities to the traveler like clearance of traveler cheques and arrangement of foreign currency. Only those travel agencies, which are authorized by the reserve bank of India under Foreign Exchange Regulation Act 1973, can deal with foreign currency. Banking companies give commission to travel agencies on traveler cheques and currency exchange. f) Educational Institutions An agency's success depends almost entirely on the competence of management and expertise of the staff. It develops manpower planning in such a way that will help to conduct on campus selection and match the student to the requirements of the company. The linkage between travel Companies and tourism education institutions will solve the problem of human resource requirements of present and future. Therefore a travel company needs to maintain close contact and interface with tourism Education intuitions. Many chief executives from the industry are the members of the advisory board of the intuitions.

g) Travel Trade Associations These associations provide a common platform to solve many problems of the members such as training, common code of conduct airlines commission to any other. There are a number of travel trade associations like TAAI, ICAO, ASTA, IATA, and PATA, WTO, that are quite active in the Promotion of travel trade at global. Essentially every travel company should be these association to avail financial and non - financial incentives and commissions from the airlines, hotels, railways etc. h) Other Organizations The travel agencies need to maintain close ties with many other organizations offering travel related service like cultures and entertainment organizations foreign tour companies' regional passport office, department of tourism both at center and states sports operators transport operators food and beverage business etc. in fact these organizations play a vital role in making travel a complete product. Travel companies provide business to above cited organization and in return receive commissions. However there are few other originations that help the agency to run travel business smoothly and promote India as a tourist Destination. Technically a Travel Company cannot work in isolation but is interdependence with other travel related enterprises. i) Inbound Tourism Most of the travel companies are in private sectors and their main objectives is to earn profit; in spite of this they play a key role in the promotion and development of international tourism. In India about 50 percent the established travel companies handle foreign tourists and other visitors make their own independent arrangements. k)Outbound Tourism Since the deregulations of air industry the outbound tourism has been increasing rapidly. Today outbound tourist traffic is growing thing at rate of 10 percent. This indicates that India is the second largest county in outbound tourism. The major outbound destinations are Europe, UK, Southeast Asia, Greece, and East Asia, USA. Egypt and Australia. The fun tours of TCI are the Evidence of quality inclusive outbound package that generally include deluxe class accommodation Indian meals transportation by deluxe couches Experienced tour escort sightseeing and interaction with local culture. This will create sound international relationship between the developing and build better relation abroad. l) Domestic Tourism The Indian Travel Companion has offered and continues to formulate flexible and economical packages to popular holiday- destinations like golden triangle, goa, shimala, kulu-manali, derjaling, Bangalore, hydrabad, Mysore, Ooty, J&K, Lakshadweep and many more destinations. In fact they are contributing to the causes of national instigation. m) Employment Generation No other sector of Indian economy has generated huge employment opportunities like the travel and tourism industry. The industry employee Over 25000 people directly and thousands of indirectly in India. The world travel and tourism council forecasts that during the next decade more than 10 million jobs will be created by travel and tourism industry along across the world

economy. n) Earning of Foreign Currency The foreign exchange brought to India by the travel companies is a vital contribution toward the national economy. It is a major factor on India Balance of payment position. Therefore the government has taken various steps either through collaboration or through their own tourist offices abroad, to maximize the tourist receipts. o) Destination Promotion Development Today many travel companies with the collaboration of state tourism corporations and tourism departments are contributing in promoting and development new destinations even the government has also provided various financial incentives to the private sector to promote tourism in the country. The role and contribution of travel companies have been fully appreciated in advanced countries. But in countries like India the role and contribution has not been appreciated and recognized due to the unorganized sector. Still the travel companies have the greatest impact on account of balance of payment, employment, international understanding and national instigation.