Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 8.1 The structure and organization of the travel and tourism industry Chapter 8

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 8.2 Tourist Product The tourist product is a complex amalgam of different services, each of which must be brought together and presented to customers by the various sector of the industry. The demand for tourism is first created, then satisfied by the concentrated marketing efforts of wide variety of organizers who provide tourist products and services. These together form the world’s largest and fastest-growing industry (figure 1).

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 8.3 Figure 1.The network of sectors in the tourism industry 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 Carriers -Air transport -Sea transport -Rail transport -Road transport (coach, car hire) Constructed attractions -Stately homes -Ancient monuments -Activity centres -Theme parks -Restaurants Accommodation -Hotels -Guesthouses -Chalets/villas -Apartments -Caravan parks/campsites -Holiday centres Public Sector -National and regional tourist organizations -Tourist information centres -Visa and passport offices -Immigration -State education in travel Tour operators and Brokers Travel Agents The Tourist ProducersSupport ServicesTravel Intermediaries

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 8.4 Figure 8.2 The chain of distribution or marketing channels The chain of distribution or marketing channels

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 8.5 The tourism chain of distribution Producers –(Transport, accommodation and attractions) Wholesalers –(Tour operators, brokers) Retailers –(Travel agents) Ancillary providers –(Public sector and private sector ownership)

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 8.6 Producers The core tourism product consists of transport, accommodation and attractions, whether constructed or natural.The producers, or ‘manufactures’, of these services include air, water-borne, road and rail carriers, hotels or other forms of tourist accomodation and the various forms of constructed facilities designed to attract the leisure and business tourist, such as stately homes or heritage sites, amusement park, conference and exhibition venues and other purpose-built activity centres such as ski resorts.

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 8.7 Wholesalers Tour operators can be viewed as wholesalers because they buy a range of different tourist products (such as airline seats, hotel rooms or coach transfer facilities) in bulk, then bundle or ‘package’ these for subsequent sale to travel agents or to the tourist direct.

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 8.8 Common-interest organizations 1.Sectoral organizations, based on the interests of a particular sector of industry (or link in the chain of distribution) 2.Destination organizations, concerned with a specific tourist destination, whether country, region or resort 3.Tourism organizations, based on a concern with travel or tourism activity as a whole All 3 types can be trade or professional bodies

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 8.9 Sectoral organizations Examples: –The Institute of Transport –The Institute of Hospitality –The Tourism Society May be regional, national or international in scope

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 8.10 Destination organizations Draw their members from both public and private sector tourism bodies sharing a common interest in the development or marketing of a specific tourism destination Share two common 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 to tourists

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 8.11 Tourism organizations Transcend sectoral boundaries within the industry Examples: –The United Nations World Tourism Organization (UNWTO) –World Travel and Tourism Council (WTTC)

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 8.12 Integration in the tourism industry Horizontal integration is that taking place at any one level in the chain of distribution Vertical integration describes the process of linking together organizations at different levels of the chain

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 8.13 The benefits of integration Benefits of scale: Horizontal integration enables companies to benefit from economies of scale by producing and selling more of a product. Vertical integration offers economies of scale through the integration of executive and administrative functions, as well as increasing leverage on the market through advertising and promotion. Benefits of a changed distribution system: The World Wide Web is undermining some of the former purposes of integration by offering an alternative method of distribution and reducing the necessity of depending on so many links in the chain. Today, no hotelier need depend anymore on granting an allocation of beds to a local ground handler, who would sell them on to a tour operator, who in turn would make them available to customers via a travel agent. Beds can be sold direct via a website and in any number of foreign languages to meet the world market’s need. Benefits of size:

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 8.14 Horizontal integration Can take several forms. For example: –The integration between two companies offering similar (i.e. potentially competing) products (mergers, consortia) –The integration between companies offering complementary rather than competing products

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 8.15 Vertical integration Can be forward (or downward in the direction of the chain) –Such as in the case where a tour operator buys its own chain of travel agents Or it can be backward (or upward against the direction of the chain) –Such as in the case where the tour operator buys its own airline Forward integration is more typical Leads to better control

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 8.16 Joint venture A foreign branch partially owned by the domestic organization, and partially owned by an entity in the host (foreign) country. Ownership could be a company, several companies, one or more individuals, and/or the government.

Holloway, Humphreys and Davidson, The Business of Tourism, 8 th Edition, © Pearson Education Limited 2009 Slide 8.17 Conglomerates and international integration Conglomerates are organizations whose interests extend across a variety of different industries in order to spread the risks incurred by operating within a specific industry such as tourism –For example Breweries have expanded into the ownership of hotels and holiday centres The travel industry is experiencing rapid internationalization in ownership