Chapter 08 The Travel Industry

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Information about Chapter 08 The Travel Industry

Published on January 13, 2009

Author: aSGuest10356


Chapter 8The Travel Industry : 1 Chapter 8The Travel Industry Tour operators, along with travel agents and ground handling agents, make up the travel industry, which are traditionally the main channels of distribution for the tourism industry. Represented by: The ITAA – Irish Travel Agents Association The ITOA – Incoming Tour Operators Association Slide 2: 2 Tour Operators Tour operators are traditionally the wholesalers of the industry They organise inclusive tours for outgoing tourists Major Irish Tour Operators: Budget Travel Falcon JWT (Joe Walsh Tours) Panorama Slide 3: 3 They traditionally organise package holidays which they sell wholesale to travel agents Organised to destinations outside Ireland Usually include a combination of a number of the following: travel to/from destination travel from airport to accommodation and return to airport accommodation catering (full board, half board, breakfast) Slide 4: 4 The tour operator usually has a courier/representative at the resort/destination to care for customers Sometimes all inclusive packages will include activities such as water sports, children’s entertainment, etc. Regulations : 5 Regulations Package Holidays are regulated by (amongst others): The Transport Act 1982 The Package Holidays Act 1995 The Transport Act 1982 demands that anyone organising packages hold a tour operator’s licence Slide 6: 6 The tour operator needs the following in order to be issued with this licence: An application form two months in advance of trading as a tour operator Company audited accounts Financial projections of future tour business Copies of the brochures and booking Terms & Conditions that will be used Arrangements for a bond (with cash, insurance, bank) – usually 10% of projected turnover. Initiated after numerous companies going bust (1984). Competent and experienced staff An annual fee, based on company turnover If the Department of Transport are satisfied with the conditions, they will issue a one-year licence Different Types of Packages : 7 Different Types of Packages Summer sun holidays Winter sun holidays Winter ski holidays Short break holidays Long haul holidays Round the world trips Cruises Group escorted tours Fly-drive packages Special interest packages (e.g. religious holidays, golf holidays) Conferences and incentive tours Slide 8: 8 Most packages to Ireland are: Group escorted holidays (especially from USA) Short break holidays (mostly British, European) Special interest holidays (golf, language learning, nature holidays) Conference and incentive tours (Ireland lacks here in terms of world share) Organising the Tour : 9 Organising the Tour Organising can take place up to two years in advance, due to the complexity and risk involved. The procedure is generally as follows: Slide 10: 10 1. Choose destination on the basis of popularity climate customs Slide 11: 11 2. Decide transport to destination charter aircraft or block book seats usually choose Irish airline (e.g. Futura) or airline of country flying to decide time of flights either pay for all seats, and run risk of not filling the aircraft ... ... or agree a return basis on unsold seats on an agreed date closer to the time of the tour (works out more expensive for tour operator) Slide 12: 12 3. Decide on accommodation hotels or apartments what grade? location – close to beach or night-life meal options must look at target market and their preferences negotiate price Slide 13: 13 4. Organise transport from airport to accommodation and return to airport 5. Work out retail price costing exercise free child places, discounts etc. demand and supply issues – peak versus off-peak Slide 14: 14 6. Prepare brochure describes all aspects of tour give times, dates, prices of tour must adhere to Irish and EU regulations (e.g. misleading terms in advertisements) Package Holidays Act 1995 demands certain information in brochure (price, terms & conditions, contact info. etc.) brochures generally prepared at least a year in advance Slide 15: 15 7. Payment in advance tour operators generally have to prepay accommodation and transport providers therefore they need to get deposit at time of reservation also use discounts for early booking 8. How does the customer book? direct with tour operator through distributor – i.e. travel agent Travel Agents : 16 Travel Agents Irish Travel Agents Travel agents are traditionally the retailers of the industry Circa 460 travel agents in Ireland (2006) Most (370) are affiliated to the ITAA Most employ fewer than ten people Larger chains are forming, especially in cities like Dublin e.g. Budget Travel, Sunway Travel Slide 17: 17 They sell the following at commission: Flights Ferry tickets Cruises Car hire Hotels Rail tickets Coach tickets Packages Insurance And can also provide information on visa, passport and health requirements. Slide 18: 18 Represented by and affiliated to: ITAA (Irish Travel Agents Association) IATA (International Air Transport Association) And through the ITAA are affiliated to: ECTAA (European Confederation of Travel Agents Association) Slide 19: 19 What is necessary to become a travel agency? A travel agency licence is necessary to operate as a travel agent A copy of audited accounts and/or financial projection must be provided with application Must prove employees hold IATA certificates Must prove that they have paid a bond (usually 4% of projected income), in order to protect customers in case the agency goes out of business Department of Transport issues the licence if they are satisfied Slide 20: 20 What does agency success depend on? Several factors: The macro environment Political Environment Economic Environment Socio-cultural Environment Technological Environment International Environment Slide 21: 21 The task environment Threat from Competitors Threat from Suppliers Threat from Customers Threat from Substitutes Threat from New Entrants Location Experience of staff Slide 22: 22 Staffing Issues Staff need numerous skills, including: computer skills interpersonal skills sales skills Use of CRSs (Computer Reservation Systems), such as Galileo (used by vast majority of Irish agencies), Sabre, Worldspan, Amadeus is essential to the success of travel agents Slide 23: 23 Job Titles include: Travel Agent/Consultant: deals with reservations, information, customer care Receptionists: customer care and administration Accounts Clerks: look after the financial side, e.g. bills payable, bills receivable, accounts, deposits, credit etc. Slide 24: 24 It is quite simple to provide customers with information about flights, ferries etc. Use CRSs to find times, dates and prices Must know airline and airport codes to aid efficient service Present customer with various options to make decision Aim is to convince customer to make reservation Slide 25: 25 It is more complex to provide information regarding a package. Must know detail about package, including resort locality, amenities, transfers, types of apartments, weather, local customs etc. Information collected over years by experience, familiarisation with literature and even resort visits Travel Distribution : 26 Travel Distribution Often the travel agent is classed as a distributor for the travel product True travel agents do not own the product they are selling – they are literally agents for the producer – known as the principal (i.e. tour operator, airline, cruise liner etc.) Their role is ‘to provide a convenient location for the travelling public to seek out information about travel, to make reservations and to buy their tickets; and to do this at a cost which is comparable with other forms of distribution.’ Slide 27: 27 A travel agent does not need much room for stock, as most of their stock is in the form of brochures. Therefore agency costs can be held down by sacrificing office space. This can be offset, however, by the demand of the consumer for travel agents to be located in a convenient location (Grafton Street etc.), which usually have higher retail rental costs. Slide 28: 28 Recent Trends in Travel Distribution Small travel agents are losing business to larger chains of agencies. These have more bargaining power with principals (product providers) and so demand higher commission. They can also afford more advanced administration/ reservation systems and rental of the best retail locations. They can afford expensive TV marketing campaigns and usually negotiate favourable credit agreements with principals. Finally, they may become a trusted household name. Slide 29: 29 Small and large agencies are losing business to customers who are encouraged to book direct by telephone/internet. Tour operators packaging and selling products direct pose a threat to the traditional travel agent (as they are not needed to distribute the package). Similarly, travel agents packaging the product themselves do not require the tour operator, which poses a threat to tour operators. Challenges : 30 Challenges 1. Disintermediation Because of aggressive promotions to customers to make direct bookings with airlines/tour operators by telephone/internet, travel agents face major challenges. Despite increasing competition and diminishing commission, profits must be achieved to stay in business, pay wages etc. Commission has been steadily reduced to agencies, especially from airlines – Ryanair, Aer Lingus etc. Slide 31: 31 Such airlines and principals see reduced commission and encouraging customers to book direct as cost cutting measures – process of disintermediation. Enables them to provide a low-cost/no frills service (Ryanair). Travel agents must ensure a fast turnaround of customers in their premises without sacrificing customer care, in order to gain profits. Slide 32: 32 2. Economic Factors Higher administration costs – staff, light & heat, rent Inflation Increasing interest rates leaves less disposable income Value of Euro versus world currencies Oil prices – cost of travel 3. Security, Natural & Agricultural Threats Threats of terrorism – NY, London, Bali, Russia Threats of war Natural & agricultural crises (Foot & Mouth disease, SARS) Slide 33: 33 The ITAA The Irish Travel Agents Association was founded in 1970 Represents the industry All their members are licensed and bonded according to the Transport Act 1982 and the Package Holidays Act 1995, as well as the Travel Trade Act Members must employ only fully-qualified staff Members display membership sticker in their premises window to imply security Slide 34: 34 Main reasons an ITAA affiliated agency would imply confidence: They are government bonded and licensed They provide professional independent advice They are experts in the use of new technology (e.g. CRS) Provide the customer with the best value Slide 35: 35 ITOA The Irish Tour Operators’ Associations (ITOA) represents 34 Irish members as well as overseas companies who ‘package and promote the various elements of the Irish Tourism Product for marketing overseas’. The organisation promotes Ireland as a destination among its 4,000 overseas partners, which include tour operators, large retail travel groups, as well as operators in the conference, incentive and events sub-sectors. Slide 36: 36 The organisation divides tour operators into three categories, as follows: 1. Professional Conference Organisers – managing all aspects of conferences and congresses 2. Destination Management Companies – managing corporate meetings and incentive programmes in a destination Ground Handling Agents – organises destinations arrangements on land for group tours, as well as individuals; acts as local representative

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