The Structure and Organisation of the Travel and Tourism Industry Faculty of Management Sciences The Structure and Organisation of the Travel and Tourism Industry Learning objectives Identify the integral and associated sectors of the travel and tourism industry Explain the chain of distribution and how this applies within the industry Understand the relationships between each industry sector Be aware of the extent of integration within the industry and the reasons for this Identify the factors leading to change within the industry and predict likely directions it may take in the future

Introduction The tourist product is a complex amalgam of different services, each of which must be brought together and presented to customers by the various sectors of the industry Demand of the tourist– satisfied by marketing efforts of the variety of organisations who provide the tourism products and services

Constructed Attractions: Tour Operators and Brokers Chain of distribution for tourism (p.183) Private Sector: Guiding services Travel insurance Currency exchange Travel trade press Marketing agencies Guidebook and timetable publishers Travel training and education providers Private ports/port services Public Sector: National and regional tourist organisations Tourist information centres Visa and passport offices Immigration State education in travel Carriers: Air transport Sea transport Rail transport Road transport (coach, car hire) Constructed Attractions: Stately homes Ancient monuments Activity centres Theme parks Restaurants/cafes Accommoda-tion: Hotels/motels Guesthouses Chalets/villas Apartments Caravan parks/campsites Holiday centres Tour Operators and Brokers Travel agents The Tourist

Chain of distribution for tourism the COD describes the system by which a product or service is distributed from its manufacturing/creative source to the eventual consumers Travel Principal (airline, hotel, car rental) Producers Tour operator (packages together travel elements from several principals) Wholesalers Travel agent, online and call centre retailers Retailers Consumers Customers (business and leisure travellers)

Producers: The core tourism product – transport (air, water, rail, road), accommodation (hotels, B&Bs) and attractions (natural/constructed: stately homes, heritage sites, amusement parks, conference venues, ski resorts) These services can be sold through: either direct, through travel agents (still the principal retailer), or through tour operators or brokers (wholesalers of tourism) Producers are also referred to as principals

2. Wholesalers: Eg. Tour operators: buy a range of different tourist products (airline tickets, hotel rooms, coach transfers) in bulk, then bundle or ‘package’ them for sale to travel agents or the tourist « producers of a new product » rather than « wholesalers of an existing product » wholesalers are also referred to as intermediaries Read about brokers p.185 in the prescribed textbook

3. Retailers: Threat to retailers: the Internet Sellers of travel packages and travel services according to client demand, they carry no stock and are simply an intermediary between the consumer and the supplier- main role: to provide a convenient network of sales outlets to the travelling public Previously only relied on commission from principals- no loyalty shown to those principals- now, no commission, but they add a fee to selling the specific tourism products Sales expertise and product knowledge that adds value to the process when a customer books through an agent

4. Ancillary/support providers: public sector organisations: those funded, controlled and organised through central/local govs and those privately owned PUBLIC: national tourism organisations: tourist offices, publicly owned airports or seaports, passport and visa docs, public education and training institutions PRIVATE: privately owned airports or seaports, freelance guides, travel insurance and financial services (forex), travel trade newspapers, travel consultants, advertising agents, etc. Eg. Heritage sites

Common interest organisations: 3 categories: Sectoral organisations: based on the interests of a particular sector of industry (or link in the COD) Destination organisations: concerned with a specific tourist destination (country, region or resort) Tourism organisations: based on a concern with travel or tourism activity as a whole Applicable to all categories: trade or professional bodies

Trade bodies vs. Professional bodies: PB: individuals whose common interest is likely to be based on objectives that include establishing educational and training qualifications for the industry, devising codes of conduct to guide behaviour, and controlling entry to the industry – to enhance status and prestige TB: grouping of independant firms, with the common purpose to exchange views, facilitate cooperation, representation and negotiation with other organisations

2. Destination organisations: An organisation that draws its membership from both public- and private sector tourism bodies that share a comon interest in the development or marketing of a specific tourist destination 2 objectives: To foster cooperation and coordination between the various bodies that provide, or are responsible for, the facilities or amenities making up the tourism product to promote the destination to the travel trade and tourists These are TRADE bodies, rather than professional bodies

3. Tourism organisations: The aim of these organisations is to compile national or international statistics on tourism or the furtherance of research into the tourism phenomenon E.g. UNWTO collects statistical info on international tourism-the publication of its data enables comparisons of the flow and growth of tourism globally E.g. WTTC provides research and statistical data – members from over 30 leading airlines and tourist organisations

Meyer, D. F. & Meyer, N. 2015. The role and impact of tourism on local economic development: A comparative study. African Journal for Physical, Health Education, Recreation and Dance, 21(1:1), 197-214.

Integration in the Tourism Industry: The process of integration takes place between sectors of the tourism industry: either horizontally or vertically HI: takes place at any one level in the chain VI: describes the process of linking together the organisations at different levels of the chain Diagonal integration: describes links between complementary businesses within each level in the chain

1. Horizontal Integration: Different forms of horizontal integration: Integration of two companies offering similar (or potential competing) products e.g. MERGERS = two hotels at the same seaside resort may merge or two airlines operating on similar routes may unite e.g. CONSORTIUM = an affiliation of independant companies working together to achieve one common benefit

1. Horizontal Integration: Different forms of horizontal integration: 2. Integration between companies offering complementary rather than competing products e.g. linking an airline with a hotel chain- both are principals- they are interdependent for their customers READ MORE ON PAGES 193 - 194

2. Vertical Integration: Different forms of vertical integration: Backward vertical integration: (or upward, against the direction of the chain) where a tour operator buys its own airline fairly uncommon occurrence

2. Vertical Integration: Different forms of vertical integration: 2. Forward vertical integration: (or downward, in the direction of the chain) where a tour operator buys its own chain of travel agents more common occurrence as organisations are more likely to have the capital to buy businesses further down the chain (less capital required to go down the chain than up the chain)

Benefits of Integration: Competition forces companies to seek ways of becoming more efficient in order to cut costs The benefits of scale: HI benefits companies by producing and selling more of a product, this reduces the unit costs of each product as the fixed costs are spread over a larger number of units VI benefits by the integration of executive, administrative and marketing and promotional functions

Benefits of Integration: 2. The benefits of a changed distribution system: The WWW reduces the nessecity of depending on so many links in the chain Tourism products can be sold directly via a website and in any number of foreign languages to meet the world market’s needs

Benefits of Integration: 3. The benefits of size: Integration is a means of growth, enabling a company to increase its market share and reducing the level of competition by forcing less efficient companies out of business Greater sales generally means more revenue: assists with costs of expansion (expertise in the workplace) Higher revenue for marketing efforts

Benefits of Integration: 3. Integration leads to control: Through direct purchase or joint venture companies, the advantage of improved control over the quality of the product exists Ensure that standards are uniform, consistent, and of the required quality to suit the market READ MORE ON PAGE 198

Benefits of Integration: 4. Conglomerates and international integration: CONGLOMERATES = organisations whose interests extend accross a variety of different industries i. o. t. spread the risks incurred by operating within a specific industry e.g. breweries have expanded into hotels and holiday centres Travel companies are currently looking beyond their own national borders to understand and adapt to stay competitive

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