iGCSE Travel & Tourism

4.2 Explore the roles of tour operators and travel agents in the chain of
distribution
International Tour Operators
Starter:
Answer

The people on the yacht decided to go for

a swim and jumped into the sea.
Unfortunately they forgot to put the
ladder down and therefore could not climb
back onto the boat. Eventually they
drowned!
Learning Objectives

►Define different types of international tour

operators and their characteristics

►Understand retail travel agents and their

characteristics
 Tour operators - RECAP

► Packages a holiday – combines components together

► Workwith airlines, hotels, tourist attractions etc.

They obtain these in large quantities and as a
‘wholesaler’

► Example on page 141.

Types Of Tour Operators

► Mass Market
► Inbound
► Outbound
► Domestic
► Specialist
Mass Market
►Mass – cater to very large numbers of people

►Tend to offer the traditional packages ‘sun

sea and sand’

►Large companies so have the most

recognisable names. E.g. TUI
http://www.tuigroup.com/en-en/about-
us/about-tui-group
Inbound Tour Operators

►Inbound – coming into a country

►Aimed at producing packages bringing

overseas visitors into a destination

►E.g. Case study page 141

Outbound Tour Operators
► Outbound operators are one that are based in the
tourists home country offering holiday packages
overseas.

► E.g.A tour operator in Doha selling a package to

go U.K and other destinations outside of Doha

► Example – Club Med page 142.

Domestic Tour Operators

►Put together packages for the ‘home

market’ which means they appeal to
people living in that country.

►E.g. London travel service in the UK

Specialist Tour Operators

►Specialise based on destination,

activity, transport or by age group.

►E.g. Destination - Hajj/Umrah tour

operators

►Examples on page 142/143

Activity
► Createan advertisement as one of the
tour operator, that you have learnt about.

► Usethe examples to help you. What will

you offer? How will you attract people to
the country? Include an example of a 3
day itinerary.

► Youcan do it any of these formats - A

speech, written, or leaflet.
Characteristics of Tour Operators
Define the following terms:
►Operating
►Characteristics

A tour operator that is based in England and sells

packages for people to come to England is what type of
tour operator?
Characteristics
►Tour operators all work in the private sector –
to gain profit

►Main trends in the industry are: economies of

scale, horizontal and vertical integration

►Through these they gain buying power

Integration
Horizontal Vertical
• Companies join together and aim • Companies expand at different
to remove competition levels of the distribution chain

• It is where one business which • Investments are either made

offers a product takes over another forward or backwards (examples?)
business who offers similar
products

• This can increase economies of

scales

• Merge at the same level

Horizontal
► The advantage of horizontal integration is that it can increase the
company’s market share.
► EasyJet now has more customers flying with them and therefore
can have more market space to promote themselves.

► A good example of this, when ‘’Go’’ a budget airline owned by

British Airways was taken over by EasyJet in 2002.
► When the companies merged EasyJet ‘’power branded’’ this
means that all of the logos and names that Go had used
previously where replace by the EasyJet name and logo.

► This had a negative impact on customers, EasyJet has more

market control, and this allows them to dictate what the prices
can be.
Vertical
►Vertical integration is when an organisation own
companies on two or more levels of the buying chain.

►An example of vertical integration is Virgin Trains

which is owned by Virgin Group and also in partnership
with the stagecoach. In the travel industry two
companies take over one another in order to find out
different ways to sell their products and services to
their customers.

►Advantage: control over suppliers in terms of quality,

availability, access and price.
Tutorial

►https://www.youtube.com/watch?v=uOO4ClVUrkw
Mainstream and Independent

►Mainstream – Mass market

►Independent – niche (specialise in quality and
tailor made)

►Characteristics page 144

Nature Of Tour Operators

►All tour operators perform similar roles which

involves planning, organising and selling tours
or packages
Activity – put the following in order

A. Releasing packages into market via

brochures
B. Research and planning
C. Consider accommodation and flight
arrangements
D. Estimate how many customers are likely
to be required
E. Contacting suppliers based on the
packages and aimed market
Activity - Answers
1. Research and planning
2. Contacting suppliers based on the packages
and aimed market
3. Releasing packages into market via brochures
4. Estimate how many customers are likely to
be required
5. Consider accommodation and flight
arrangements
1. Planning Process

►Involves market research – why?

►Can increase sales and maximise profit

►Data from both internal and external sources

from previous seasons and what the
competitors are offering
2. Negotiating

►T.O’s negotiate with providers which is

often carried out by senior managers

►Contracts are then put together

►Negotiations include agreements on price,

quantity and quality. Why are these
important?
3. Different Contracts
Ad Hoc Allocation/ Commitment/
release back Guarantee
Flexible approach A number of beds
– bookings are have been agreed T.O guarantees to
made as and when on, if they are not pay for a certain
required and a sold by an agreed number of beds
discount has date the tour
already been operator is able to
agreed on give them back
4. Finalising
► T.O’s usually charter a plane – which means to make
a ‘block booking’ of all the seats on that certain
flight

► An appropriate price for the package is then decided

on (considering all the costs)

► Printed brochures or online

► Sales and reservations begin

 Package holiday.. Profit?

►CAA (Civil aviation authority) has recorded that

in the UK the return on turnover (profit) was
approximately 8GBP on a 400GBP holiday.

►Tour operators set prices at least 12 months

before – what could be the risks in doing this?

Key word: fluctuation

Risks

► Fluctuation in prices – e.g. Exchange rates, fuel

costs etc.

► Unexpected loss of popularity in a specific

country/location

► Example: no one could have predicted the impact

Covid-19 pandemic had on the world travel industry.
Q’s – write your answers in your copy
books

1. Why is there a variety of prices when looking

through a holiday brochure?
(3 marks)

2. What factors can affect the flight prices?

(4 marks)
Main components affecting tour operators
price:

► Peak and off peak (seasons)

► Flight times
► Single room and other
accommodation supplements
Peak And Off Peak Pricing

Summer (May to Oct) and Winter (Nov to April)

1. Demand changes so what happens to price?

2. Which would be classed as ‘peak’? Why?
3. What might happen during off peak seasons?
Flight Times

►Most customers prefer to travel during

the day – how would this affect price?

►Some are prepared to travel at unsocial

times if the price is right
Single Room And Other Supplements

►Brochure holidays state prices ‘per

person’

►With rooms, this would mean a single

traveller would still be paying the cost for
a whole room
T.O’s and exchange rates

1. Why would tour operators need to know

and use exchange rates?

2. How could exchange rates affect tour

operators?
Surcharges

►This is a fee that is added to the cost of a

good or service.

►A surcharge is typically added to an

existing tax, and may not be included in
the stated price of a good or service.
‘No surcharge guarantee’

►T.O’s sometimes decide against this.

►Meaning they DO NOT PROMISE to not charge a

surcharge

►By law in UK T.O’s are prevented from passing 2%

increase in costs once the holiday has been
booked – provides customer with protection
Case Study

Lets read the case study on page 147!!

Consumer Protection

Read through ‘travel weekly’ on page 147

Answer the following:

1. What do you think is meant by consumer
protection and why might it be used?

2. What is the article about?

Consumer Protection
►Designed to protect consumers and give them rights when
buying goods and services

►http://www.protectedtravelservices.com/company/uk-tra
vel-laws-and-regulations
Consumer Protection

►Strong competition can lead to tour operators

facing financial failure

►This could lead to liquidation

►What do you think happens when this happens?

►What is done to prevent this?

Consumer Protection

►Crucial part of tour operators

►Countries have developed

licensing/passed legislation
designed to protect customers
once they purchase holidays
Legislation

►Package holidays and package tour regulations

1992 (adopted in EU) – the aim is to give
customers access to compensation if things go
wrong with their holiday

►Before this, tour operators in EU claimed no

responsibility
Activity
• Read case study on page 148 and
answer the following:

1. How does USTOA work?

2. What is ATOL and what is its purpose?
3. What benefit would a tour operator
have of being ATOL protected?
Retail Travel Agents

► We know that travel agents act as a _______ ______ for a variety of __________.

► ‘Principals’ are considered to be the ________ of travel and tourism industry

products.

► For example: ______________

a) Airlines, hotels, tour operators etc.

b) Selling agent.
c) Suppliers
d) Principals
Discuss

From what we have learnt

so far - Lets discuss the
main roles of travel agents
Role of travel agents

► Act as a _________ which is the ________ between

the customer and the tour operator/principals.

► This means the ________ represents both the

customers and the ___________ so acts as a ‘middle
man’

► link
► Suppliers
► Agent
►
Role

►Act as a selling agent for a variety of

principals such as airlines, hotels, tour
operators etc.

►Act as a ‘intermediary’, link or ‘middleman’

between customer and tour operators which
means they represent the interests of both
customers and suppliers.
Role of T.A’s

►Do not necessarily ‘buy in’ stock in

advance to sell on to customers.
►React to the demands – e.g. contact the
suppliers on behalf of customers to see if
there is availability
►Customers can be inbound, outbound,
domestic or VFR – what does VFR stand for?
Provide examples for each Product &
Services offered

►Overseas holiday packages

►Short breaks
►Cruise holidays
►Flights, coach, rail and ferry bookings
►Accommodation bookings
►Travel insurance
►Theatre bookings
Provide examples for each Product &
Services offered

► Car hire
► Excursions and entrance tickets to tourist
attractions
https://www.tripadvisor.com/Attraction_Products-g295424-zfg11867-Dubai_E
mirate_of_Dubai.html

► Foreign exchange
► Passport and visa applications
► Airport parking
► Information on health requirements
Examples
►http://www.firstchoice.co.uk/holiday/holiday-extras
.html

►https://www.co-operativetravel.co.uk/extras
Travel Agency Appointments

►T.A’s must know the terms and conditions under which

they serve the interests of the suppliers (whose
products and services they are selling) why is this?

►Most common agreement is made with tour operators

where the travel agents agrees to sell packages for an
agreed amount of commission
TA Agreements
►Also made with individual principals such as
hotel chains, coach companies etc.

►The agreements set out the policies and

procedures that the travel agent should follow:
►Issuing tickets, vouchers and other documentation
►Cancellation and refunds
►Racking brochures
►Accounting for the payment of deposits and balances
Operating characteristics of T.A’s

►Aim to make a profit within the private sector

►Many T.A’s are located where people pass – high
visibility
►How do you think advances in tech has changed
this? What is benefit of this?

►Ebookers page 150

Characteristics continued..
►Strong competition from the growth in direct ______
from T.O’s so T.A’s need to use a _______ approach by
offering a _______ of packages and not just the
traditional _____, _____ and ______ packages

►Variety
►Sun sea sand
►Sales
►flexible
► T.A’s are now offering tailor made packages
to cater for specific needs e.g. Adventure
tourism, culture tourism etc.

►3 types of travel agents:

► Independent: privately owned (like a sole trader)
► Miniples: T.A’s with a small number of outlets in
one geographical area
► Multiples: operate a large number of outlets
under a single brand name and often part of a
large chain as a result of vertical integration of
tour operators
T.A’s And Consumer Protection

►As T.O’s ensure their customers are protected

in the event of financial failure T.A’s are
protected in the same way.

►E.g. International airport transport association

accreditation (IATA)
►Includes standardised procedures to
ensure fair dealings with airlines

►http://www.iata.org/Pages/default.aspx
Plenary
►In a short summary explain the concepts you
have learnt about within this topic.

►Tip
►You may wish to look at your notes and
summarise them.