Tour Operations Management The Economics of Tour Operating The Planning Cycle.

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Presentation transcript:

Tour Operations Management The Economics of Tour Operating The Planning Cycle

Pricing an Inclusive holiday See Yale (1995) The Business of Tour Operating What needs to be included in the costing?

The Economics of Tour Operating Negotiating bulk rates Yield Management High Utilisation Contingencies – exchange rate and fuel price fluctuations Cash-flow management Secondary spend

The virtuous circle of tour operating Thomson Holidays in Morgan 1996

Negotiating issues How are the rooms contracted –dTime Block, Sale or return, free-sale? Deposits or pre-payment Release dates Regularity - closed-out dates? Exclusivity? Facilities

Yield management Aim to maximise overall revenue by balancing supply and demand (Middleton) Differentiated prices acc to season, time, and customer segment Discounting to stimulate new demand without reducing yield from existing customers Danger - creating expectations of bargains? - effect on perceptions of value?

High utilisation results from Good yield management operational efficiency –back to back flight schedules –quick turn-round times consolidation –moving customers and cancelling flights/rooms Conflict between utilisation and quality of service? Ethical issues?

The vicious circle of tour operating Morgan in ETUP 2001

Cash-flow management Aim to balance receipts and payments to minimise the need for borrowing incentives for early booking interest on deposits year-round programmes timing of payments to principles see Middleton 1994, Yale 1995

Secondary sources of revenue Add-on products –commission –merchandise cancellation charges foreign exchange dealings advertising

The Tour Planning Process based on Holloway (1994), Laws (1997) Research Negotiation Administration Marketing Operation Select Resort Hotels Agree rates & capacity with hotels and flights Set prices, design brochures, set up CRS Brochure launch, advertising, agency support Review sales, tactical pricing Tours start, Monitor CSQs Yr 1 Summer Yr 2 Winter/spring Spring/summer Autumn Yr 3 Winter/spring Summer

Does the package holiday have to be a low-profit margin business?