objectives

Define the role of a tour operator and distinguish between

different types of operator
Explain the functions of each type of operator
Understand how operators interact with other sectors of
industry
Understand how the activities of operators are constrained
Understand the basic principles behind the construction and
marketing of a package tour
Understand the appeal of the package tour to its various
markets
Evaluate alternative methods of tour distribution and
recognize the importance of new forms of electronic
reservations and sales systems for operators and their clients

The role of the tour operator

Distinct function:
Purchase separate elements of transport,
accommodation and other services and combine
them into a package which they then sell directly
or indirectly to consumers.
Sometimes classified as Wholesalers: break bulk

Sometimes classed as Principal/Supplier

Tour operators position

Travel principal
(airline, hotel, car hire, etc)

Tour operator
(packages together travel
elements from several
principals)

Travel agents

Customers
(Business and leisure travellers)

The specialized roles of tour operators

1. The domestic operator
Organize package holidays domestically
To a destination within a country which the
tourists reside
2. The incoming operator
Handle incoming foreign holiday makers
Merely ground handling on behalf of overseas TO
May provide comprehensive range of services
Specialize in the markets being served

The specialized roles of tour operators

3. Other specialization
Specialize in a particular aspect of operation
Mode of transport
Based on markets they serve or the products
they develop
Mass market vs specialists aiming niche
Based on Geographic Destination
Based on market (age, marital status)

The specialized roles of tour operators

4. Air Broker
Specialize in providing seats in bulk to other tour
operators
Consolidators: consolidate flights on behalf of
tour operators that have not achieved a good
load factor for their charters
Deal directly with airlines buying seats in bulk
& arranging to sell these
Seats sold is smaller bulk blocks on individually to
other TO or TA
Earn a markup

The nature of tour operating

Inclusive tour programme: a series of integrated

travel services, each of which is individually
purchased by the TO in bulk and resold as part of a
package at an all inclusive price
What are the integrated services?
Aircraft seat

Accommodation at
destination

Transfer between the

accommodation and
the airport on arrival
and departure

Other services such

as excursions or car
hire

 Success depends on:

Ability to buy its individual products, put them
together & sell them at an inclusive price lower
than the customers could obtain themselves
Value for money

TO keep prices low by:

Problems of seasonality

Peak and off peak periods

Being highly price sensitive and entitlement of
longer periods of holidays entitlement has helped
to reduce the affect:
Encourage to take a second holiday
How to encourage clients out of seasons?
By the use of marginal costing: pricing holidays to
cover their VC and making some contribution to
FC

Planning, marketing and operating

package tours
Research/planning

Marketing

Negotiation

Administration

1. Research/Planning

FIRST STAGE OF RESEARCH

Looks at the economic factors influencing future
development
Identify likely selection of destinations
SECOND STAGE OF RESEARCH
In-depth comparison of alternative destinations
Determine:
Destinations, hotels, capacity, duration of tours,
departure dates
Make policy decisions on size and design of brochures,
number of print and date for print completion

2. Negotiation
Tenders put out for brochures

Negotiation with airlines for charter flights

Negotiation with hotels, transfer services
optional excursion operators
Contracts completed with hotel and airlines
and transfer services, etc

3. Administration

Determine exchange rates

Estimate SP based on inflation
Galley proof from printer, corrections made
Necessary reservations staff recruited and trained
Final tour prices to printer
Brochures printed and reservations system
established

4. Marketing
Brochure on mkt, distribution to agents
Initial agency sales promotion
First public media ad, trade publicity
through press
Peak ad and promotion to trade and
public
Recruitment and training of resort reps

Role of resort reps

Handling general enquires
Advising on currency exchange, shopping and so on
Organizing and supervising social activities at the
hotels
Publicizing, selling and booking optional excursions

Handling special requirements and complaints and

acting as an intermediary for clients.

Pricing the package tour

Vital to get the price right
Has to be:
Right to market
Right compared with the price of competitors
package tour
Right by comparison with the price of other tours
offered by the company.
Pricing varies for specialist operators and mass
operators.

Costing the package

cost

Percentage of overall costs

Charter air seat

45

Hotel accommodation

37

Other services at destination

Head office overheads

Travel agencies commission

10

Discounting strategies
Discounting on published tour prices become
a widely accepted practice in the industry.
Originally applied to late bookings in order to
clear seats.
TA decides to pass on to the clients a
proportion of their commission
Heavy discounts by market leaders through
their own retail chains

Cash flow
In normal booking clients pay
operators 1 year earlier.
Operators need to pay
hoteliers their advances and
need to make deposit to
charter flights.
Late bookings and payment by
credit card will be a fall in
interest earnings by the
operators

Yield management
Price of companys package right so that
sufficient demand is generated to fill available
seats while at the same time prices are not so
cheap as to threaten profitability

Tour brochures

Vital marketing tool

Main influence on the customers decision to buy
Large sums invested
Principal means for:
Informing customers about the product
Persuading them to purchase it

Brochure design and format

Large companies
Own advertising departments
Design by studios
Small companies
Done by themselves (but advised to get
professional help)

Information required in the brochure

Name of the operator

Means of transport
Itinerary
Duration
Price, etc

Brochure distribution and control

Decide
Use all TA
Select the most productive
Key ratio
That of brochures given out to bookings received

The reservation system

Design of the system depends on:
Reservations taken manually
Reservations taken by computer
Sell through agents or direct to public
Large companies use CRS

The distribution network

Selection of retailers
Operators take up retailers and occasional
bookings direct

Relationship with TA

Draws up a
formal
agreement

Specify terms and

conditions of
trading