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The World Tourism Organization defines tourists as people who "travel to and stay in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes not related to the exercise of an activity remunerated from within the place visited".
The travel and tourism industry can be considered as a conglomerate of all those individuals and organizations that are involved in the production, distribution and consumption of travel and tourism products. Karcher • It can be seen as an umbrella industry, containing a set of interrelated businesses, involving travel companies, accommodation facilities, catering enterprises, tour operators , travel agents, providers of recreation and leisure facilities. Lendberg Definitions
Travel and tourism represent approximately 11% of the worldwide GDP, according to the World Travel & Tourism Council. As an umbrella industry, it relates to many sectors such as culture or sports. Large provider of new jobs. Features of tourism industry
The Importance of Travel and tourism : Statistical Evidence – 1998 (WTO) Europe is declining. East Asia/Pacific grew from a share of 1 % (1960) to 14% (1995).
UNWTO reports: • Tourism expected to double in next 15 years • Increasing interest in nature and cultural tourism • 37% of all international trips include a cultural component • Nature travel increasing at annual rate between 10% and 30% GeneralTourismTrends
The ways in which tourists can be grouped are: • Demographics---age, income, family status, education; • Location of their residence---instate, out-of-state, local; • Important product attributes---price, quality, quantity; and • Lifestyle attributes---activities, interests, opinions. • It is often wiser to target smaller segments that are presently not being served, or served inadequately, than to go after larger segments for which there is a great deal of competition. Segmentation
By service offered: • Mass Tourism Package tour • Alternative Tourism Business Tourism Medical tourism
By nature of the activity: • Active Adventure tourism Ecotourism Golf • Passive Sightseeing Beach holiday Cruise
Location preference Coastal Rural City Mountains Lakes • Duration of trip and distance travelled Day trip - local Weekend break - national Annual holiday - international
By purpose Business or Pleasure Pleasure: need for change, see something new* Culture (ethnic)* History, heritage* Nature-based (eco-) tourism* Farm-based, rural tourism* Personal development, health* Visit friends, family* Social status (to brag!)* Recreation
By age/socio-economic group Backpackers Empty Nesters DINKS SINKS Early/Active Retirees Youth Backpackers: 18-24 years, no children. Attracted to adventurous activity. Consider themselves travellers not tourists. Generally well-educated. Cost conscious.DINKS: Double Income No Kids.SINKS: Single Income No Kids.Both Dinks and Sinks: younger people, between 25 and 35 years of age, no children, affluent.Empty Nesters: Parents whose children have flown the family nest. Between 45 and 55 of age, well educated, high disposable income.Youths: Between 18 and 25 of age, not well-educated, low disposable income, are used to travelling, (have learned it during the upbringing) and know how to indulge 'the good life'.
Accessibility Amenities (e.g. Catering, entertainment) Accommodation Attractions ( e.g. Scenic, historical, exhibitions, sporting events) Activities ( e.g. Outdoor and indoor recreation activities) Major components of tourism destination
Intangibility Tourism product is a collection of tangible products and intangible service Airlines offers intangible elements in the form of transportation and tangible elements in the form of foods, seats etc Characteristics of service
Production and consumption of tourism services are inseparable A tourist who wishes to go on vacation must travel to the destination to consume the services offered at the destination(Fridgen, 1996) Inseparability
Tourism services are heterogeneous in nature because they vary in standard and quality over time • We can’t expect that two tourists will have same experience in same trip environment. • Similarly two tour operators can give totally different kind of service on a same tour. Heterogeneity
Tourism services are perishable in nature e.g an unsold hotel room or an airline seat cannot be stockpiled for sale at a later date. Perishability
Marketing Mix is a term describing the key elements used by an organisation to help it meet its marketing objectives The marketing strategy, or mix, should be viewed as a package of offerings designed to attract and serve the customer or visitor. Elements of Marketing Mix:- Product Price Promotion Place What is the Marketing Mix?
The Tourism Product Set of products, integration by service components and information
The core service, which is the main reason for service purchase. • The expected service, which consists of basic service and tangible support service (e.g. hotel room plus a comfortable bed and a telephone, transportation services , good quality meals) • The augmented product, which has some added value in terms of reliability and responsiveness, service quality, price options(e.g. supply of free travel brochures) • The potential product, which consists of future service offerings in order to attract new and to keep existing customers.(e.g. Providing online reservation service) Product levels
Price: When establishing prices, we should give attention to pricing strategies which may encourage off season and non-peak period sales, longer stays, group business, and the sale of package plans etc. • Promotion: Communicating the offer of a travel and tourism product/service to customers. Promotion includes advertising ,direct mail, printed brochures, presence at travel trade shows, and participation in joint marketing schemes. • Place: Physical location of the travel/tourism facility and degree of accessibility to/for customers Marketing mix...
Exogenous factors affecting travel and tourism • Economic and financial developments • Tourism is income sensitive with different elasticity for different regions. • 1% growth in private consumption leads to no change in tourism, whereas a growth of 2,5% results in a growth of 4% in travels spending. • Exchange rates are crucial: 5% drop (or rise) in the relative cost of travel abroad results in a growth (or fall) of 6% to 10% in tourism movements. • The increased flexibility in work time will lead to more & shorter vacation.
2. Demographic and social changes • The main tourism generating countries are aging, leading to increased travel of the relatively high income group (between 35 - 55 years of peak earning years). • The groups of "singles" as well as of women are of increasing importance. • Relatively high unemployment rates in developed countries have also been taken into consideration as a negative factor. • 3. Technology • This is not only related to IT, but also to advances at decreased cost in construction and manufacturing, especially in the transport industry.
4. Infrastructure, equipment and facility investment: Limiting factor for travel and tourism. For example, airlines will only be able to finance 40% of their investment needed for a renewal of their aircrafts. In addition, airport capacities are in many cases inadequate for supporting further growth. 5. Political / legislative factors: Deregulation as well as privatization strategies are intended to break down barriers for entry in travel and tourism. It should be noted, that this has not yet produced the foreseen growth in the former states of Eastern Europe
6. Environmental issues: The growing awareness of environmental issues is putting an increasing pressure on suppliers and destinations. Environmental impact assessment will become crucial. But appropriate measurements will contribute to a sustainable development. 7. Safety: This constitutes a constraint for the development in specific destinations, many outbound countries in the Western hemisphere show a high sensitiveness in their travel behavior.
Structure of tourism market Consumers Tourist NTO travel Intermediaries outlets agent government bodies tour RTO operator CRS/GDS DMO, Planners & Administration incoming LTO agent hotel chain Suppliers Primary other transport Airline supplier
The model shows the market structure, circles indicate the classes of players, links the major relationships. All players are interacting, e.g. DMO interacts with tour operators as well as with travel agents but their main working relationship is with suppliers and local tourist boards. The model distinguishes between suppliers, intermediaries and consumers, where intermediaries are subdivided into the “professional” players and the different destination management organizations with their specific tasks. Structure of tourism market…….
The travel and tourism industry, especially the airline industry, has been an early adopter of Information technology. The growth of the airborne traffic and of tourism could only be achieved by technological leadership. One of the unique characteristics of tourism products is the need of the role played by the so-called travel intermediaries. These travel intermediaries are travel agents, tour operators, conference organizers booking agents etc. They are so important again because of the nature of the tourism product, Perishability and intangibility. applications of it in travel and tourism
Let us take an airline company as an example. An airline company, which flies many destinations, can have a representative but cannot have so many offices or product distribution channels in all routes it serves. Here comes the role of travel agents. One can imagine if the airline can run these many say sixty offices on its own which are usually with high fixed costs. This makes the travel agents an indispensable partners both in efficiently distributing and marketing the product and substantially reducing the cost of operation for the airline. As these are working on commission basis, the cost of operation for the airline is relatively low. These travel agencies are performing this indispensable task of being intermediary by the use of computers and computer reservation systems (CRS).
Airlines Hotel Chains Tour Operators Travel Agents Destination Management Organizations (DMOs) Facilitation Major Components of travel and tourism industry
Technologically most advanced sector in the tourism field, with growing importance due to the tendency to long haul tourism. • Airlines were among the first companies creating worldwide electronic networks, for the means of selling and distribution, for internal management and operations. • In this sector we also include other technologically advanced companies: • Other types of transport suppliers (car rentals, railways, maritime industry) • Enterprises such as credit or media companies (transaction or content). • Conceptually, huge and powerful suppliers the same group as the SME structured overnight facilities. Airlines
This group is situated both on the intermediary as well as the supply side since many chains represent marketing and operation units, where the accommodation is owned by a different unit. This market is dominated by US multinational corporations, which in 1992 owned 13 of the top 20 chains. They have learned to cooperate. In 1989 70 major hotel brands established THISCO as a computer switch to provide a common electronic booking interfaces to their hotel central reservation systems worldwide. Hotel chains
The main function is to purchase and to assemble a large number components produced by the principals, and to sell these as packaged products. They act as whole-salers, performing nearly as virtual enterprises since the value they add to a product is the aggregation process. They conduct the main marketing and distribution activities and have part of the financial risk of unsold stocks. One of the main advantages for suppliers is that tour operators have a good market access, well known brands and that the financial risk can be passed on, at least partially. They experience a fierce competition and have a rather limited control over the quality of the product. Tour Operators
Travel agents act as a distributor, broker or retailer on behalf of the suppliers, their main contact with the supply side is the tour operator. Their income is done on the base of a commission, a percentage of the product price. These are designed in such a way that travel agents should prefer specific operators and/or systems. They are the main point of contact for consumers. They are part of the international electronic distribution network constituted by the CRS/GDS. By the means of these systems they may also access products of tour operators, perform reservation as well as billing tasks. Travel agents
The tasks of DMOs are manyfold: • they are responsible for destination management, • planning activities, • marketing/branding of the entire destination, • training and education, • and they are very often also engaged in the daily operation. • Their objective is to promote a destination's tourism by maintaining the social, cultural, economic and environmental basis, having thus also a political function. • They are often genuine governmental institutions. • They have to represent all suppliers in a democratic way, without preferencing a single group. • Normally they are paid by tourism related taxes. • And normally excluded from reservation activities. Destination Management Organizations (DMO)
Facilitation is one important aspect of enhancing tourism business. Facilitation includes, issuing of visa, customs clearing and immigration check in ports. Lack of appropriate management in giving fast and efficient service to tourists in this area will deter the tourist flow substantially. Recently, development has come about in using electronic medium for facilitation purpose. An example on this subject is Australia; a country developed ‘Automated Visa Application System’ which is called ETAS (Electronic Travel Authority System). Facilitation
Different IT modules extensively used in travel and tourism Industry
The airline CRS systems were the pioneers of computer applications in the 1950s and are now virtually indispensable to airlines because they enable their revenue streams to be maximized by efficient inventory control (an inventory in this context refers to an airline’s stock of passenger seats that is available for sale). • The travel agent is connected on line to the central host computer system or CRS. The host computer is almost always a mainframe with massive database attached. The mainframe host polls each travel agent terminal every second or so, to see if it has any messages to send. In this system it is possible that airliners, Hotels and car rental companies can talk to the travel agent and vise versa. This system contributes to a great extent in increasing sales volume and giving precise information on the availability and selling the products efficiently ensuring substantial profit gain. CRS (Computer Reservation System)
Unlike the CRSs used solely by an airline or hotel chain, GDS distribute more than one CRS to users who are usually travel agents. GDSs were formed from the airlines of several CRSs, each of which had its airline backer. Once formed, there was a period of some consolidation and shakeout, after which four main GDSs emerged. These are Amadeus, Galileo, Sabre and World Span. These world leading GDSs are switches or simply computers that are connected on the one side to many different supplier systems and on the other side to many end users. However it is pertinent to say that GDS are the macro version of CRSs with a specialized and improved information technology for the distribution of Travel products. GDS (Global Distribution Systems)
Thisco Another example of a worldwide industry network is given by THISCO(The Hotel Industry Switch COmpany). It was established in 1989 for linking the major hotel chains, representing the main product suppliers, to the respective CRS/GDS. Thus, it provides common electronic booking interfaces for hotel reservation systems worldwide. It is owned by 70 major hotel chains. Recognizing and obviously accepting the fact , that the CRS/GDS represent the main distribution channel, these hotel chains have successfully applied a cooperative business strategy. UltraSwitch performs the switching as well as the translation of data formats necessary for the communication of the different systems. General Distribution Systems Hotel Reservation Systems Sabre Galileo Amadeus UltraSwitch WorldSpan Internet THISCO System
Australia developed ‘Automated Visa Application system’ which is called ETAS (Electronic Travel Authority System).This system works with three inter-linked functions, each of which is supported by computers that are located in different parts of the world. (i) A front-end ETA application processing system supported by travel agents chosen GDS or CRS. (ii) An international data collection and routing system based on a SITA computer located in Atlanta, and (iii) A data base look-up and electronic funds transfer system supported by the Australian Immigration Department’s computer in Sydney. Based on these networks the electronic visa, where nothing will be put on the applicant’s passport will be processed for the traveler by an authorized travel agent. The travel agent feeds its computer with all details of the traveler and transmits to Australia where the details appear on the Australia Immigration Department computer. At arrival the visitor will be checked in the immigration computer at Sydney Airport by simply entering his pass port number. This system has proved to be efficient and time saving and had generated an immense tourist flow from year to year to Australia. ETAS (Electronic Travel Authority System)
Cooperation and competition in the Internet Tourist Travel agent @ Internet Portal @ Internet @ Internet @ Internet @ Internet Travel Web Expedia Airline Hotel Chain CRS/GDS UltraSwitch Hotel reservation system
Fastest growing market • Inbound tourist expenditure per head is third highest in the world. • However, the average duration of stay of foreign tourist in India is one of the highest in the world. • Tourism has the distinction of being the third largest export industry after gems and jewelleries and readymade garments in India. • The Tourism industry's foreign exchange earnings in India are around $3.2 billion Indian tourism industry
