TOPIC 8 RETAIL TRAVEL AND TOUR OPERATIONS

TOPIC 8 RETAIL TRAVEL AND TOUR OPERATIONS

INTRODUCTION
This chapter introduces students to the operations of retail travel and tour. The chapter
begins by discussing travel industry, specifically in terms of travel product and travel
market before it further discuses and explains types of travel operations. A discussion on
travel agency as a segment of tourism industry stresses on the roles and types of travel
agency. The chapter continues by discussing processes of developing tour packages
including types of tours and reasons for purchasing tours. Finally, the chapter concludes
by discussing marketing and sales strategies of retail travel and tour.

OBJECTIVES
After completing this chapter, you should be able to:
1. list major travel products, vendors and end-users;
2. identify types of travel operations;
3. explain the roles of a travel agency;
4. explain how a travel agency makes money and identify major revenue sources;
5. identify common components of a package tour;
6. discuss the differences between independent, hosted, and escorted tours;
7. describe the difference between selling and marketing; and,
8. explain the importance of personal selling and sales promotion to a travel agency.

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MIND MAP

Travel Industry Types of Travel

*Product Operations
*Market *Retail travel agents*Tour
operators*Tour
wholesalers*Consolidators
*General sales
RETAIL TRAVEL AND agents*Special channelers
Marketing and
OPERATIONS
Sales Strategies
*Marketing vs
selling*Two most
common strategies
Travel Agency as a Segment of
Tourism Industry
Tour Packages Preparation *Roles
*Types of tour*Reasons for *Types
purchasing*How do tour
operators work?

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Thomas Cook: The Beginning of Modern Tour Package

In 1841, a British carpenter and Baptist missionary known as Thomas Cook arranged
transportation for 570 rail passengers traveling to a temperance convention. He
chartered a train to the meeting venue of Temperance Society from Loughborough to
Leicester. Cook also printed brochures advertising brass band music and tea and
buns on the 10-mile journey that only cost one shilling or about 15 cents in todays
currency. The chartered train steamed out of Loughborough on July 5 according to
schedule, the first of many organized tours for which Thomas Cook would later
become famous.
Cook was best known for organizing deluxe tours for the worlds wealthiest citizens
although he is believed to have been the first full-time travel agent. He escorted a
group of industrialists from England and America to the Paris Exhibition in 1895. In
1896, Cook organized a Grand Tour of every major European country. His tour
group enjoyed elegant accommodations in the best hotels in Europe and traveled first
class on luxury trains and ships. The groups were accompanied by a guide whose job
was to make sure that all arrangements proceeded smoothly according to the plan.
Worlds famous personalities such as Thomas Edison and Samuel Clements or better
known as Mark Twain, were among Cooks clients.
His prepackaged trips undoubtedly inspired other people in the travel industry to
organize similar tours, known as package vacations, to all parts of the world. Cooks
ability to arrange every detail of a tour in advance, from lodging and transportation
to sightseeing and meal services was the main reason for his success. For the entire
trip, Cooks clients paid a lump sum since they knew their exact itinerary and all costs
the trip would entail before they departed.

4.1 TRAVEL INDUSTRY

Today, the travel industry represents one of the most significant sectors of the worldwide
economy as spending for international and domestic tourism is over trillions of dollar
annually. In fact, the travel industry has been considered by many to be the largest
business in the world. Despite of global problems such as terrorism, currency fluctuations,
recession and inflation, and many other factors that can deteriorate the growth of tourism,
people all over the world in both developed and developing countries place a high priority
on travel.

4.1.1 Travel product

The terms travel industry, tourism industry and travel and tourism industry are used
interchangeably to refer to the industry made up of businesses that provide travel-related
services (Foster, 1995). In this context, travel vendors are used to refer to these
businesses while their services are known as travel products. The people who purchase
and use travel products or end-users are referred to as guests, clients or passengers,
depending on what product they are purchasing or using. Several examples of travel
vendors, products and end-user are illustrated by Table 4.1.

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To elaborate, a hotel sells the right to occupy a room for an agreed-upon period namely a
stay. An airline sells tickets for air transportation which entitle passengers to occupy a
seat on the aircraft while it travels between two designated points. There are also many
other travel products that exist, ranging from car rentals to yacht charters. Their temporary
nature is the most prominent feature of all these products. In addition, the possession of
each travel product, whether it is a hotel room, an airline seat, a rental car, or
accommodations on a cruise ship, has both a starting and an ending point. Finally, all the
end-users who purchase a travel product, at some time or another, make up the travel and
tourism market. The end users also include the followings such as executives traveling to
meetings, families traveling on vacation, traveling sales representatives calling on clients,
scientists attending conferences and people visiting relatives.

Table 4.1: Examples of travel vendors, their products, and end-users.

Vendor Product End-User

1. Travel agent Travel arrangement Client
2. Airline Air transportation Passenger
3. Hotel Lodging accommodations Guest or client
4. Car rental firm Automobile rentals Client
5. Tour operator Preplanned trips Client
6. Cruise line Cruise accommodations Passenger
7. Bus line Bus transportation Passenger
8. Railway line Rail transportation Passenger
9. Tour guide Sightseeing tours Client
10. Taxicab company Local transportation Client

4.1.2 Travel market

In the simplest term, travel refers to any movement of one or more people from one point
to another. In the context of travel and tourism, the travel market consists primarily of
people who spend at least one night away or travel a long distance from their places of
residence. According to the United States Transportation and Tourism Administration,
travel is defined as any trip of 100 miles or more.

There are two broad categories of travel market: business travel and leisure travel.
Business travel refers to any travel conducted for monetary benefit. It is also called as
commercial travel. Several examples of business travelers are sales representatives,
executives and convention goers. On the other hand, leisure travel refers to travel
conducted primarily for recreation, entertainment, or sport. For this category, resort
guests, vacationers, adventure hobbyists and sightseers are several examples of its
travelers. Table 4.2 illustrates examples of business travel and leisure travel.

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Table 4.2: Examples of business travel and leisure travel
BUSINESS TRAVEL
a. Business meetings:
Malaysian Chamber of Commerce
going to London 1-week fact-finding
tour of Germany
Public Relations executive going to
Johor Bahru to discuss business
proposal with clients
MITI officials going to Japan to
discuss about trade issues
b. Conference and conventions:
OUM representatives attending 3-
day conference on Distance Learning
in Hong Kong
Attending Conference on Eco-
tourism in Kuching, Sarawak
OIC conference at Putrajaya
c. Exhibitions and trade fairs:
Going to Korea to participate in the
International Tourism Promotion
Malaysian Education Expo, at Putra
World trade Centre, KL
MATTA TRAVEL FAIR, the Mines
Exhibition Centre, Serdang,
Selangor.
d. Incentive travel:
Weekend golfing at Chiengmai for
achieving the highest sales target
One week holiday to Europe for
clinching multi-million ringgit
contract
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LEISURE TRAVEL
a. Holidays:
A weekend break at Port Dickson
3days trip to Bali
Home-stay in Labu Felda, Negri
Sembilan
b. Sport:
Going to Old Trafford to watch MU
match
Visiting Sepang Formula One circuit
to watch F1 race on the weekend
Going to Perlis to support Selangor
FC away match
c. Health and fitness:
A walking weekend at Frasers Hill
Visiting Hot Water Spring at Pedas,
Negri Sembilan
Spending a weekend at the fitness
centre at Bukit Tinggi
d. Education:
A weekend at Mulu Cave to study
about the tourism impact of the area
Spending 3 days at OUM library to
utilize the facilities there
Going to Paris to study French at
one of language college
e. Culture and religion:
A week stay at Dayak longhouse to
study their culture
Muslims go for Haj or Umrah
Christians visiting Vatican City in
Italy
f. Social and spiritual:
Rukun Tetangga weekend at Port
Dickson
Yoga meditation course at Bukit
Tinggi
A weekend reflexology workshop
g. Visiting Friends and Relatives (VFR):
Staying with a friend in Temerloh
Going back to kampong about 120
miles away for kenduri
Staying with grandmother for a week
during school holidays during durian
season.
 RETAIL TRAVEL AND TOUR OPERATIONS TOPIC 8

THINK!

1. Can you list any tourism product that you purchased six months ago?

2. Which category of travel market do you belong to?

4.1.2.1 Business travel

Based on peoples motivations to travel, the market for business travel consists of three
segments namely corporate travel, commercial group travel and institutional travel.
For each segment, the end users have slightly different travel needs.

Corporate travel
o include people attending business meetings, sales representatives calling
on clients, managers making site inspections etc.
o often do not have advance notice when making their travel arrangement, so
they pay higher since the lower discount rate i.e. airfares must be
purchased earlier

Commercial group travel

o the market consists of attendees of conventions, meetings and conferences
o a convention is a gathering of people with a common interest or purpose,
commonly held for educational, social or scientific purposes by professional
and trade associations, corporations, and special-interest groups
o average length of convention is four (4) days
o convention travelers may qualify for reduced rates on air travel and lodging
since conventions usually draw a large number of attendants (suitable and
adequate facilities are highly required)

Institutional travel
o the market consists of employees of governments, schools, universities,
hospitals and other similar institutions
o includes such travelers as teachers attending conferences, scientists
pursuing research, diplomats traveling to meetings, and military personnel
on leave
o have many of the same needs as corporate travelers
o often qualify for discounts from airlines, hotels and other vendors

4.1.2.2 Leisure travel

The market for leisure travel also consists of three segments based on the motives, needs
and traits of travelers. The segments are family travel, single resort travel and special-
interest travel.

Family travel
o 92% of American families have traveled by automobile at least once (AAA)

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o family who travel together may have special needs i.e. require recreational
facilities for children or accommodations that allow pets
o children may qualify for discount fares on some airlines and families may
often take advantage on special tour rates
o also includes vacationing couples prefer to stay at resorts that cater to
couples

Single resort travel

o the needs of single resort travelers often differ from those of couples or
families
o some seek accommodations specifically oriented to adults; other want to
meet people of the opposite sex
o cost savings may or may not be priority to this type of traveler

Special-interest travel
o the fastest growing segment of leisure market
o focus on a specific theme, activity or event
o adventure travelers such as mountain climbers, scuba divers, and trail
hikers
o sports enthusiasts such as golfers, tennis players, skiers, and sport
fishermen
o other examples: health, fitness and beauty enthusiasts as well as such
nature enthusiasts as whale watchers, bird watchers, and butterfly
collectors
o growing public awareness of environmental problems has created a new
market for ecological travel or ecotourism, emphasizing the preservation of
natural resources and the protection of wildlife

4.2 TYPES OF TRAVEL OPERATIONS

One of the most important part of the tourism industry is the businesses which create and
sell holidays and other travel related services to those who stay away from home. For
students, it is important to understand the differences among the types of intermediary
operations involved in the selling and providing of travel services. Either as business
associates or competitors, a retail agency must deal with tour operators, wholesalers,
consolidators, general sales agents, and specialty channelers. Figure 4.1 indicates that
suppliers can sell their services directly to travelers or through any one or more stages in
the sales distribution system. It is also important to understand these operations and how
they interrelate in order to facilitate more business dealings and assist in uncovering new
opportunities for increasing revenues.

4.2.1 Retail travel agents

Retail travel agents act as agents for travel suppliers such as hotels, airlines, cruise lines,
car rental firms and railroads which pay commission to the retail agencies for selling their
respective services. Retail travel agencies sell directly to the client and do not take
ownership or have any advance commitment to purchase travel services from suppliers.
No purchasing being made by a retail agency from any supplier until a client has already
paid for the travel services he or she has requested.

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Generally, a retail travel agency helps people with the need for travel services by making
reservations for hotels, airline flights and car rentals; selling tour package, travel insurance
and travelers cheques; developing travel itineraries; and providing one-stop convenience
in planning and collecting payment for all services related to a trip.

Usually, retail operators are usually outbound oriented as their operations involve making
reservations and providing services for people who are away from home for a vacation or
business. In contrast, an inbound tour wholesaler is mainly concerned with incoming
passengers arriving at a particular destination.

Retail agencies may occasionally develop tours on an ad hoc basis for a specific group or
client. Developing a tour upon a clients request, however, does not mean that an agency
is engaging in wholesale operations, although in some cases travel agencies do operate
both retail and wholesale divisions.

4.2.2 Tour operators

Tour operators may market their tours through retail travel agencies or sell directly to
travelers upon arrival at their destinations. They may also supply wholesale travel
agencies with ground packages on a contractual basis. Primarily, tour operators are
responsible for delivering and performing the services specified in a given, advertised tour
package. In fact, they can provide these services themselves since some own hotels,
buses and other facilities. They can also obtain those services from other tour operators
or from other travel suppliers such as bus companies, hotels and car rental firms.

Ground operators are tour operators who provide services at the destination only and
usually do not package or market transportation from or to the destination. Ones who
package the transportation from or to a destination complete with ground services are
outbound tour operators and outbound tour wholesalers.

A tour operator typically offers various packages, either escorted or unescorted, in a single
season for individual or groups. To take advantage of lower group airfares, common
departure points such as Kuala Lumpur and Penang were used in the past to collect and
stage individual travelers. With todays low discount fares (e.g. Air Asia low cost airfare)
and bulk fare contracts, however, individuals can travel inexpensively by themselves.
Therefore, to face and counter this challenge, tour operators and wholesale travel
agencies are now offering flexible packages that can be varied to suit the individual needs
of the travel agencys clients.

4.2.3 Tour wholesalers

Not dealing directly with consumers unless they also operate a retail division, tour
wholesalers specialize in designing tour offerings that are marketed through retail travel
agencies. Tour wholesalers may specialize in developing tours for inbound travel,
outbound travel, or both. Wholesalers are different from retail travel agencies in the sense
that a wholesaler will contract for services from suppliers in large volume to achieve lower
cost per unit and the repackage the services for resale through retail travel agents. To
succeed, a wholesale operator must have a great ability to design and market tour
package that meet the needs of traveling public.

By providing suppliers with stable business throughout the year, a wholesaler can contract
for services at substantially lower costs than a retailer. On the other hand, a retail agent

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may be willing to commit to suppliers during peak travel periods but not during off peaks
when agents assistance is really needed by suppliers to sell their available capacity. In
this case, wholesalers will have greater leverage with suppliers since they provide steady
volume throughout the year.

In the context of outbound travel, wholesalers develop package tours that are offered with
predetermined dates of departure. For inbound packages, they usually comprise ground
services which may include any one or all of the following: transportation, reception,
accommodation, baggage handling, food and beverage, and sightseeing tours.

4.2.4 Consolidators
A consolidator was a person or company that specialized in forming groups to travel on
airline charter, but for today, the term does refer to travel companies that receive
maximum overrides in return for an annual volume of substantial size or lower contracted
rates. In fact, a consolidator is a wholesaler and is usually not set up to sell directly to the
public. The term consolidator is often associated with airline seats but conceptually the
term can also be applied to other components.

Usually, airline consolidators sell through retail travel agents and other travel
intermediaries. Consolidators may waive some of the restrictions associated with
discounted tickets depending upon the contract with the airline. In certain cases, a
consolidator may even sell directly to individuals by establishing a separate retail operation
but it has to compete directly with outside travel agencies.

4.2.5 General sales agent

A general sales agent (GSA) refers to an exclusive representative of a principal for a given
area. The principal in this context may be a supplier of a hotel, an off-line airline or a car
rental firm that does not have its own sales office in the area. A GSA may also be the
officer or representative for government tourism bureaus or other destination organizations
that plan to establish a market in the area where the agent is located.

In many cases, the principal normally contracts a GSA by specifying the terms and
conditions of the representation. GSAs may be authorized to act on behalf of the principal,
with regard to travel suppliers, in taking reservations, making sales calls, and completing
sales transactions.

4.2.6 Specialty channelers

Unlike retail travel agents, specialty channelers that include incentive travel firms, meeting
planners, and professional conference organizers, usually do not receive commissions or
act as middlemen in reselling travel services. Instead, specialty channelers act as
intermediaries on behalf of the organizations they represent in contracting for travel
services at efficient costs. As specialty channelers, incentive travel firms do not fit the
normal pattern because they may either sell their professional services of designing and
implementing an incentive travel program for a buyer or act as middlemen for both
suppliers and buyers. Other examples of special-interest travel that often involve specialty
channelers include company educational programs, student tours, and clubs.

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Important notice on WHOLESALING:

The terminology in the wholesale travel business is a bit confusing; the definition of a tour
wholesaler may be the same as for a tour operator.
A tour wholesaler is a person or company that arranges transportation, hotel
accommodations, and other traveler needs to create a tour package that is sold to
the consumer through a retail travel agency (sometimes the term tour wholesaler is
used interchangeably with tour operator).
A tour operator is a person or company that sells the tour package directly to the
consumer after contracting with transportation, hotel accommodations, and other
travel needs for the arrangements.
o A tour operator may also be a tour wholesaler by selling some of the tours
through a travel counselor and selling others directly to consumers.
o May also sell directly to the public by owning a retail travel agency.
One distinction between a tour wholesaler and tour operator is that:
o an operator may actually own the vehicles used on the tour, employ the
driver and escort, and own some of the facilities; WHILE,
o a wholesaler leaves the operation of the tour to the individual suppliers such
as the bus company etc.

THINK!

1. From whom do you requently purchase travel services? Why?

2. If you are a tour operator, what sort of travel business would you operate?
Why?

Figure 4.1 : Travel Sales Distribution System

Suppliers Buyers

Carriers Individual or
Group Traveler
Lodging

Food Services
Travel Agent, Tour Individual or
Car Rental Operator, or Specialty Group Traveler
Firms Channeler

Entertainment
Specialty Channeler, Travel Individual or
Cruise Line Wholesaler, or Tour Agent Group Traveler
Operator
Resorts

Etc. Wholesaler or Travel Specialty Individual or

Tour Operator Agent Channeler Group Traveler

Source: Gee, C. Y., Makens, J. C. and Choy, D. J. L. (1997).

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4.3 TRAVEL AGENCY AS A SEGMENT OF THE TRAVEL

INDUSTRY
There are many vendors within major travel industry segments (as in Table 4.3) . Retail
travel agencies sell travel arrangements directly to the public. For travel agencies, their
main products are transportation, accommodations and packaged tours. The primary
product line for most of travel agencies are airline tickets. How a travel agency channels
products to the public is clearly illustrated by Figure 4.2 . A travel agent, technically, is the
owner or manager of an agency but other employees are also commonly known and
referred to as travel agents. Not only making sales but a travel agents job also involves in
gathering information, researching travel products, analyzing options and making
recommendations. Therefore, for all of these reasons, travel agents are often referred to
as travel counselors or travel consultants.

Table 4.3 : Examples of vendors within major travel industry segments.

Segment Vendors
Travel agencies Full-service agencies, airline ticketing agencies,
cruise-only agencies
Airlines Passenger airlines, aircraft charters
Lodging establishments Hotels, motels, resorts, inns, condominiums
Car rental firms Automobile and truck rentals, van charters
Tour wholesalers Tour operators, consolidators
Cruise lines Cruise ships
Bus lines Bus companies, bus charters
Railway lines Railway companies
(Source: 1992 U.S. Travel Agency Market Survey, Lewis Harris and Associates)

Domestic
Airline
International
Airline
Business
Hotel
Travel Vacation
agent Resort
Car Rental
Company
Sports/Tour
Operator
Public

Figure 4.2 : How a travel agent channels products to the public

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4.3.1 Roles of travel agency

The most popular form of purchasing services is through travel agencies. In fact, travel
agencies have now become the department stores of the tourism industry. In general,
travel agencies sell travel to the public as they offer a wide range of travel tickets and
holidays, through their travel agents. Travel agency is a place where customers go for
advice and information, and to purchase travel. As an important intermediary in tourism
distribution channels, travel agency makes information and services widely available cost-
effectively. In fact, a travel agency may perform a variety of value-added functions such
as:
provides information about types and availability of services;
makes reservations and other travel arrangements;
assembles packages of services;
contacts current and potential customers;
prepares tickets; and,
bare financial risk by buying services in bulk for resale to customers.

Travel agencies have no stock because travel agents do not buy the travel in advance. In
fact, travel agents sell on behalf of the company which provides the travel services or
tour packages. For example:
To book or wish to fly on a scheduled flight
o Travel agency counter clerk gives advice on prices and different airlines,
and times of various flights.
o When customers have decided on a particular flight, the clerk calls up the
carrier and checks availability.
if the seats are available, the clerk books the seats using the
computer terminal
then, the airline tickets are printed/written and presented to the
customer.
o No purchase has been made by travel agent unless or until customers
agree to buy the seats.
unsold seats belonged to carrier.

Agency makes profit through commissions paid by suppliers as the agency sell their
services to customers. However, they do not take title to the services they are selling.
The more the travel agencies sell, the more commissions they earn. Commission rates
are subject to change and vary from agency to agency. Figure 4.3 illustrates typical
percentages at which travel agencies earn commissions on various product lines.

Domestic Airline International Hotel Car Rental

Ticket Airline Ticket Reservation
10% 8% 10% 10%

Tour Package Escorted Tour Group/convention

Package
11% 15% 15%

Figure 4.3 : Examples of Typical Commissions Earned by Agents

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Other services provided by travel agencies are:

coach, train and airline tickets: domestic and international;
cruise trips;
package holidays and short break packages;
hotel rooms and other forms of accommodation;
travel insurance;
foreign currency and travellers cheque; and,
car hire/rental.

It has also been noticed that one of the most important roles of travel agent is: to advise
customers on a wide range of matters relating to travel. This can be very time consuming
but if the customer eventually makes a booking, it is worth the time.
For example:
A just-married couple want a honeymoon holiday somewhere cool and
happening and they have RM 10,000 maximum to spend. They will need advice
from their travel agent on:
the best time to go
the best place to go
what their hotel is like
how far it is from the major happening spots
whether the hotel will provide halal or vegetarian food for them
what there is to do in the way of entertainment and sightseeing
whether or not they will need to have special injections to protect
them against illness
In this case, a good travel agent will be able to give advices professionally by using
his or her own experience and knowledge on destinations and carriers etc. through
reading and familiarization trips (also known as fam trip - a trip organized specially
for travel agency staff usually for a few days)
For example: A group of travel agents may be invited by the owner
of a hotel in Kuala Lumpur to spend one or two
evenings there, sampling the accommodation and
learning about the facilities on offer. The hotel owner
hopes that the travel agents will be impressed, and
will remember the hotel and recommend it to their
customers. Fam trip is an important way in which the
travel agency staff can update their knowledge of
what they are selling.

Some travel agencies make their living by selling travel only to businesses rather than
public. These agencies are known as business house agencies. However, most travel
agencies sell both to companies and general public. In United Kingdom, most overseas
tour packages purchased by British tourists are bought from the top tour operators such as
Thomson, ILG, Intasun, Horizon, British Airways and Airtours, while in the United States,
the agencies listed in Table 4.4 dominated the travel market in 1999. In Malaysia, there
are more than 1,900 travel related companies registered as members for Malaysian
Association of Tour and Travel Agents (MATTA) that also include some familiar names
such as Reliance Sightseeing, Sime Darby Travel, Mayflower Acme Tours, Triways Travel
and Tours, Borneo Tours and Asian Overland.

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Table 4.4 : The Top Ten U.S. Travel Agencies

Agency 1999 U.S. Gross Revenue (in millions)
American Express $13,700
Carlson Wagonlit Travel 11,000
WorldTravel Partners 4,300
Rosenbluth International 4,200
Navigant International 3,300
Maritz Travel 1,740
Liberty Travel 1,390
Sato Travel 1,200
Travelocity.com 1,200
Expedia, Inc. 832
Source: Top 50 Travel Agencies, Travel Weekly Focus, 2000, June 26, p. F6.

4.3.2 Types of travel agency

As discussed by Cook, Yale and Marqua (2002), many travel agencies specialize by
focusing their efforts on large target markets such as leisure and business travelers, while
others serve a general group of clients, or specific market niche such as cruise-only
customers. They have listed nine types of travel agency as can be seen in Table 4.

Table 4.5 : Types of Travel Agency

TYPES DESCRIPTION
Independent Small agencies, privately owned, unaffiliated with any larger
agencies organization; traditionally serving clients from a walk-in office location or
over the phone.
Agency chains- Mega-agencies that have dozens to hundreds of branch offices
wholly owned throughout a region, country or worldwide.
Agency chains- Semi-independent agencies affiliated with each other through franchise
franchises agreements.
Consortium-affiliated Independent agencies that link together through a consortium to gain
agencies the financial benefits of a chain but have lower fees and commissions.
Specialty agencies Agencies that offer limited services, such as cruise-only agencies.
Corporate travel Agencies that provide services to business clients but not regularly to
agencies the general public. Specialize in business clientele and may have
branch offices on-site at major clients locations. Frequently
compensated by management fees rather than commissions on the
travel services they sell.
Corporate travel Similar to corporate travel agency but agents are employees of the
department organization in a department that handles the travel needs of the
organizations employees.
Home-based Agents could conduct their services from their homes, using electronic
agencies technology, rather than from an office location which clients meet with
the agent in person. May be independent or affiliated with some
organization
Internet-agencies Agencies that may or may not be home-based that attract and serve
clients primarily through Internet and use telephone, fax, postal
communications to a lesser degree than traditional agencies.

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4.4 TOUR PACKAGE PREPARATION

4.4.1 Types of tour packages
As defined by the United States Tour Operators Association (USTOA), the word tour
encompasses a broad and varied array of products, ranging from highly structures
escorted packages to a collection of independent components travelers piece together
themselves. Tour packages may vary widely in the number of elements included and in
structure of the itinerary. Usually, tour packages include at least two of the following
elements namely accommodations, transportation, entertainment, meals, attractions and
sightseeing activities.

Generally, there are three types of tour packages:

Independent Tour
o the traveler is able to be independent of a group, BUT still part of a tour
o traveler can determine departure and return dates as well as budgetary
constraints
o purpose: to enable travelers to obtain all the benefits of volume discounts
and prearranged, guaranteed rates without sacrificing independence and
flexibility
o independent tours vary in flexibility and complexity
o other tours: fly/drive, rail/drive, rail/fly, cruise/fly etc.
o the key to independent tour: the cost savings for the traveler

Hosted Tour
o provides more scheduling opportunities for the traveler and a host who is
available at each major tour destination to assist the traveler in planning
activities and sightseeing excursions
o the host (who is typically a rep. of the tour or a ground operator) is found at
desks in the lobbies of all hotels featured in the tour
o travelers rely on the services and events offered by the host to enhance
their vacation
o the host can arrange for sightseeing trips from the hotel, purchase tickets
for events, and offer a variety of tour arrangements for each day
o travelers are allowed to arrive and leave when it is convenient and choose
from a variety of hotels
o the different between the independent and hosted tour is in the availability
of tours and services at the destination; the hosted tour has scheduled
activities to choose from, whereas an independent tour does not

Escorted Tour
o the type of tour that generally comes to mind when a tour is mentioned
o a structured program of sightseeing, meals, transportation, and
accommodations
o travelers are responsible for getting themselves to the starting city on time
o the tour consists of a group of people who travel together for the entire trip
o a bus is usually used for the travel
o a professional escort is with the group at all time responsible for the
safety and enjoyment of the travelers and makes sure the tour operates
smoothly; sometimes local guides are frequently used
o it is a relaxing vacation many people do enjoy the escorted tour

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o the tour is completely arranged

o modern-day buses with air conditioning, quiet motors, plenty of leg room,
and smooth rides provide a comfortable setting for the traveler
o tours are usually tested many times to assure that the mileage can
comfortably traveled travelers do not waste time looking at maps and
brochures, trying to decide where to go next

4.4.2 Reasons for purchasing of tour packages

There are five major reasons that tour purchasers should consider especially before
purchasing any tour package. The reasons are as the following:

Convenience
o Decision making process can be shortened since travelers do not need to
spend a lot of time deciding what to do and which supplier to use.
o Include all the details needed by travelers such as ground transfers,
baggage handling and tipping.
Cost-savings
o Tour packages are usually less expensive than the cost of purchasing
travel services separately.
o Volume discounts of tour wholesalers can be shared with tour purchasers.
Worry-free
o Tourists are able to concentrate on new experiences especially when
traveling on a hosted or escorted tour as all travel problems and details are
in the hands of tour personnel.
One-stop shopping
o One payment covers the cost and related paperwork of two or more
services makes the buying process becomes easier to tour purchasers.
Special treatment
o Tour members tend to receive preferential treatment due to the big
volume of business tour operators represent to service suppliers.

Your Idea

Based on your experience, what is the most important reason to be considered

before purchasing any tour packages? Why?
What type of tour packages will you prefer for the next holiday trip? Why?

4.4.3 How do tour operators work?

Situation: A tour operator XYZ in U.K. decides to expand the package holidays it offers in
its brochure by adding a new destination, Langkawi Island of Malaysia.

Then, what XYZ will be doing?

A representative from XYZ travels to Langkawi on a fact-finding mission and
discovers that a new hotel is being built on a pleasant location close to both the
beach and the main town on the island.

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He discusses the plans for the hotel with the owner and is satisfied that it will
provide suitable facilities i.e. swimming pool and rooms with balconies.
He then finds local coach operator and discusses the journey from Padang
Matsirat airport to the hotel in terms of how long it would take and how much
the coach operator would charge.
The rep. also looks around to see whether there is enough for tourists to do in
the evening and enough sightseeing and possible excursions for the daytime.
If he satisfied, he will book a number of hotel bedrooms from the hotelkeeper
for the summer season two years from then
He returns to the island the following year to finalise arrangements with the
hotelkeeper, the coach operator, and to arrange sightseeing tours.
On returning to XYZ, he reserves the necessary number of seats on charter
flights throughout the following summer season, and agrees a certain price for
the entire package.
The package is then included in the XYZs brochure for the following summers
holiday

In this case, it can be seen that one of the main roles of tour operator is to plan and put
together all the elements of the package holiday and to produce attractive brochures
containing details of these holidays, with prices. Tour operators often able to get cheaper
rates of hotel and other related services than a member of the public because they reserve
the services i.e. hotel rooms and aircraft seats in advance and in bulk, therefore, they can
often negotiate with the carrier or hotelkeeper for discounts. The main problem for tour
operators is to get their brochures to the general public in order to sell the holidays
advertised. Sometimes, a company such as Thomas Cook can fulfill the roles of both
travel agency and tour operators in which it organizes package holidays as well as running
travel agencies but its travel agencies sell a whole range of travel and holidays, not only
Thomas Cookss own packages.

Ward (2000) has listed steps to be taken in creating a tour package as illustrated in Table
4.6.
Table 4.6 : Creating a tour package

STEP
Choose destination
Plan the size of their operation
Arrange accommodation
Book flights
Plan transfer services
Work out a price
Train and place resort reps
Advertise their holidays
ACTIVITIES
Deciding how easy they are to reach, whether they are
attractive, what facilities there are and whether they are safe
Working out how many holidays they think they can sell in each
destination and what sort of profit they would like to make
Checking it for availability, quality, safety and closeness to
facilities
Reserving well in advance seats on charter flights to airports
close to the accommodation
Making sure that passengers can get easily from the airport to
the place they are staying in
Including the cost of transport, accommodation and some profit
for the business
Making sure there is someone in the destination to help tourists
with local information and sorting out problems
Producing brochures, newspaper adverts, special offers,
describing products on the internet

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Sell their holidays Agreeing commission rates with travel agents, setting up a
telephone sales team, putting reply forms in adverts
Deal with any complaints ** Answering letters and phone calls, giving compensation where
something serious has gone wrong which is their fault
Advertise new products to their Sending letters to holiday-makers who have returned home,
existing customers ** encouraging them to try a different destination
** Steps to be taken after people return home from holiday.

4.5 MARKETING AND SALES STRATEGY

4.5.1 Marketing versus selling
Marketing is simply what you do to get and keep customers. Starr (2000) has defined
marketing as the process by which sellers find buyers and by which products and services
move from suppliers to consumers. In addition to attracting the most desirable prospects
and converting them into customers worth keeping, the most effective marketing today
places a strong emphasis on managing customer relationships. Thats especially true in
travel where relationship marketing is more and more becoming a critical success factor.

In the context of travel industry as similar to other industries, to reach consumers a

company needs marketing strategies that make relatively similar services or products
stand out. A marketing strategy in this sense is a plan for selecting and analyzing a target
market and developing and maintaining a mix of products to satisfy the target market
(Starr, 2000). Most marketing strategies focus on the FIVE Ps as simplified in Table 4.

Table 4.7 : Five Ps of the Travel, Tourism and Hospitality Marketing

Product What the vendors sell

Anything that satisfies a consumers want and need
Price Actual cost of the product or service
Values consumers place on a product
Place Where the product to be sold
Activities to ensure availability of product or service to buyers at a
convenient time and right location
Promotion Communication of persuasive and positive product information to a
target market
How buyers find out about the product
People Those who mix these variables and sell the product
Source: Starr (2000).

In Websters New World Dictionary, marketing is defined as all business activity in the
moving of goods from the producer to the consumer, including selling, advertising,
packaging, etc. In addition to doing the right thing in terms of what the customers think,
value, and do; getting and keeping customers also depends on what the competition does.
To satisfy the customers, an agencys entire operation should be geared toward
discovering the customers total needs.

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While marketing is concerned primarily with the much more sophisticated strategy of trying
to have what the customers may want, selling is generally concerned with the plans and
tactics of trying to get customers to exchange what they have (money) for what the
suppliers or sellers have (service or product). As selling focuses on the needs of the
seller; marketing, on the other hand, focuses on the needs of the buyer. Not like
marketing which is preoccupied with the idea of satisfying the needs of the customers by
means of the services rendered, selling is preoccupied with the sellers need of converting
their product into cash.

In addition to what that have been discussed before, Gregory (1989) has listed several
other roles and characteristics of marketing as the following:
Marketing is something more than a business function as it views the entire
business process.
Marketing is concerned with more than overall business strategy and keeping up
with competition.
Marketing is concerned with agency policy.
Marketing is concerned with salespeople and sales compensation.
Marketing is concerned with advertising and sales promotions.
Marketing also is concerned with effective organizing.

Gregory (1989) believes that a travel agencys survival depends on how effectively
individual agents make the decision involved in formulating a marketing program than will
enable them to compete with others, not only with other travel agents but also with many
other industries that are competing for consumer dollars. Therefore, it is true that the
selection and retention standards for travel agents will be getting stiffer and increase in the
future.

4.5.2 Two most common strategies

As for today and the future, personal selling procedures and sales promotional efforts are
becoming more and more important. In fact, the ultimate success or failure of any
marketing effort will be determined by the competency of individuals who perform it.
Therefore, it has been noticed that personal selling and sales promotion, together with
advertising are becoming the major components of the overall promotional programs of
most agencies.

4.5.2.1 Personal selling

Undoubtedly, personal selling is very important and critical to the success of travel
agencies and is a valuable sales tool to most tourism suppliers. In general, personal
selling is a process of communications that includes discovering customer needs, finding
the appropriate services to meet those needs, and then persuading the customer to
purchase those services (Cook, Yale and Marqua, 2002). Personal selling skills can
provide a key ingredient to make customer satisfies with services he or she has purchased
and acquired. Effective travel agents cultivate long-term customer relationships by
creating win-win situations for both suppliers and customers.

To effectively sell a service, firstly, travel agents must be knowledgeable about the service
to gain customer trust and confidence. Effective travel agents also must be honest,
likable, and dependable in addition to being customer oriented and acquiring detailed
knowledge of the services they are selling.

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As described by Cook, Yale and Marqua (2002) in Table 4.8 , personal selling involves a
series of six closely steps that include the approach, presentation, demonstration,
negotiation, close, and follow-up. In addition to the six steps of the selling process, a good
travel agent provides consistent high quality service to clients. To create customer loyalty,
a good travel agent should promptly return phone calls and e-mails, immediately solve
problems, provide simple tokens of appreciation by sending thank you card and keep on
informing about special offers to his or her regular as well as prospective customers.

Table 4.8: Six Closely Steps of Personal Selling

STEPS ACTIVITIES
Approach Involves agents first contact with a client may be over the phone, through e-
mail, or in person.
Agent has a responsibility to create a professional and positive impression
through common business courtesies.
Presentation Qualifying the customer involves asking questions to discover his or her travel
related needs and price range.
Demonstration Provides an opportunity for the agent to present the features and benefits of a
service or package of services that will meet the customers needs e.g. making a
recommendation as to the best airline schedule or suggesting and presenting
sales proposal for a major convention.
Sales tools used: videotapes, brochures, testimonial letters from satisfied clients,
virtual tours through web sites or reprints of travel articles.
Negotiation Involves responding to objections that usually can be cleared up through active
listening and clarification. Active listening and clarification can help clear up many
objections. However, agent should anticipate possible objections such as special
requests, time of year, brand-quality perceptions, and price. In fact, agent should
be prepared to overcome or counter these resistance points.
Close Formally, the sale is closed when the reservation is confirmed, a contract is
signed as a deposit is made. Actually, closing the sale entails helping customers
make a decision that will benefit them.
Follow-up As the final step in the selling process, follow-up or providing service after sale
can create customer loyalty and satisfaction. Agents can create repeat business
by letting their customers know they care about them.

4.5.2.2 Sales promotion

In particular, sales promotion activities should be regarded by management as
supplementary devices designed to complement and emphasize personal selling and
advertising. In introducing a new agency, sales promotion devices particularly play an
important role. Principals in travel industry, such as airlines, hotels and tour operators, are
very generous in providing the agent with sales promotion materials and window displays.
However, few have actually attempted to train agents in the sales promotion techniques
and strategies needed to develop the potential business in their area.

As indicated by Gregory (1989), to help introduce a new agency, sales promotional

programs are used to :
attract new customers and give emphasis on the complete service agency;
publicise the agencys own escorted tour;
counter a competitors sales promotions;
assist others in the travel industry in developing interest in a new destination or
area;
reduce the extent of a seasonal decline in travel; and,

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upgrade the business.

In general, sales promotional activities aimed directly at prospective customers can ce

divided into those that can reach the customer either:
in the home or place of business by using direct mail; or
at travel shows, film shows or lectures to schools, clubs, and other groups; or
in the travel agency itself.

SUMMARY
The terms travel industry, tourism industry and travel and tourism industry are used
interchangeably to refer to the industry made up of businesses that provide travel-related
services (Foster, 1995). Therefore, one of the most important parts of the industry is the
businesses which create and sell holidays. As a service-oriented industry that focuses on
meeting the needs of the traveling public, the success and profitability of the industrys
suppliers depends on their ability to reach and meet the needs of selected target markets
effectively and efficiently. For the suppliers, they should have a very good understanding
of the relationship between travel vendor, travel products, and end-users; as well as travel
market which is categorized into business travel and leisure travel. Travel businesses also
include retail travel agencies, tour operators, wholesalers, consolidators, general sales
agents, and specialty channelers, but the most popular form of purchasing tourism
services is still through travel agencies. Travel agencies make profit through commissions
paid by suppliers as they sell the suppliers services to customers, however, they do not
take title to the services they are selling. In travel and tourism industry, many tourists and
travelers are prefering tour packages rather than buying related services individually. Tour
packages include at least two of the following elements namely accommodations,
transportation, entertainment, meals, attractions and sightseeing activities. Finally, as
similar to other industries, to reach consumers and sell services effectively, a company
needs particular marketing and sales strategy. Personal selling and sales promotion are
the two most common marketing and selling strategies for many agencies.

Glossary
Agent a person authorized to sell the products or services of a supplier.

American Automobile Association (AAA) An organization that provides its members

with a variety of services related to owning and operating automobiles. AAA also operates
a multi-branch retail travel agency organization.

Commission The percentage paid to a travel agent by tourism suppliers for booking
travel arrangement.

Escorted tour An all-inclusive tour with a structured itinerary and a guide who
accompanies the guests, also called a conducted tour.

Familiarization trip Also called fams or fam trip. A trip or tour offered to travel
agents, incentive planners, tour operators, travel writers etc. to promote a new product or
destination and the services of the suppliers at low or no cost.

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Fly/drive A package that includes airfare and car rental (and sometimes
accommodations).

Full-service travel agency An agency that offers a full range of services and products
related to international and domestic travel.

Ground arrangements Land services such as transfers, sightseeing tours etc.

Ground operator A supplier that provides services such as local transportation,

accommodations and sightseeing arrangements to a client at a destination.

Hosted tour A host is available at each major tour destination to welcome guests, solve
problems and answer questions.

Incentive companies Professional firms assisting clients with designing, promoting, and
executing of incentive travel programs.

Incentive travel Travel arrangement (paid and all inclusive) rewarded to sales staff,
distributors, or other members of organizations for sales and work performed that exceeds
particular quota levels.

Override Additional bonuses offered to travel agencies beyond their usual commission
to encourage the agency to sell more tickets etc. by suppliers based on incremental
quantity or volume of sales.

Principal The dominant participant in any given situation. In travel: (a) a primary
producer of travel product an airline, a shipline, a hotel; (b) any person or company that
assumes responsibility for a travel program; (c) anyone who pays a commission to another
for selling a travel program.

Retail travel agency A travel agency that sells travel products on a retail basis on behalf
of his or her principals for a commission to the general public.

Supplier One who offers the products or services sold through the travel retailers or in
some cases directly to the public.

Tour operator A business entity engaged in planning, marketing, preparing, making

reservations, and, at times, operating vacation tours.

Tour package Two or more travel services put together by tour operator at a
significantly lower price for the combination of services than could be obtained if each had
to be purchased separately by the traveler. The total price of a tour package might include
airfares, hotel accommodations, meals, ground services, admission fees etc.

Wholesaler A company that usually creates and markets inclusive tours and packages
or buys services in bulk for sale or resale through travel agents.

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