When final decision has been made- approximately a six months process, we can move on to the next stage, which is putting the 3 main elements - the product the package holiday together accommodation, transport and transfers.
Accommodation
The staff involved in contracting the accommodation and related services have to negotiate on price, quantity and quality, within a very competitive environment .It is likely that other mass market operators, for example, will be using the same hotels in their programmes. An operator may try to negotiate exclusive use of particular accommodation, but this will involve a financial commitment on behalf of the operator that it may not be willing to risk.
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Commitment – tour operator may agree to buy a specific number of beds for the season regardless of how many it actually manages to sell. The higher the percentage of beds they, make a commitment to in this way, the lower the price the hotelier is likely to accept .In a good year, this can be very profitable. However, in a bad year it may mean the operator paying for lots of beds it is ultimately unable to sell. Although unsold beds are less costly than unsold flight seats, commitment offers little flexibility and is therefore only really appropriate in established resorts with a mass market. Even when an operator does opt for commitment they are unlikely to commit for 100% of their bed requirements.
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Allocation-Alternatively, a tour operator may agree to an allocation of rooms in hotels, which will put on sale up to a specified date. On the ‘released date’ the rooms revert to the hotelier to fill if still unsold. Although ‘release dates’ are usually three to four weeks before the holiday date. If rooms are required after the release date, the tour operator will have to phone, tax or teletex out to the resort to regain the room. This is a more costly in administrative terms, but less risky than being left with unsold beds.
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Ad Hoc- tour operators can contract beds as and when they are required by phone, fax or teletex to the resort. Administratively this is the most costly method and involves the client in a wait for confirmation but incurs no risk to the operator.
- Negotiate with the airlines for charter flights
Because they do not have to operate to a regular schedule, charter airlines can be more flexible than scheduled ones: if a destination is selling poorly, flights can be drooped or consolidated; if one is doing unexpectedly well, the operator will look round for extra charter capacity to contract.
Most tour operators offer ITC packages using charter flights to keep process down. However, customers only really want to fly on charters when there is a significant price differential between them and the scheduled equivalents, which are still thought of as offering better service and standards of comfort. As price margins narrow, so operators are becoming more interested in using scheduled services.
When it comes to contracting the required number of charter seats for their holidays operators have three possible ways of proceeding.
The operator may contract for a ‘time charter’ or ‘whole-plane’ charter whereby they charter whole aircraft for specific times, perhaps for one day a week, or for one season, or for one year.
Some operators will not want to contract for the whole aircraft but will opt for a ‘part charter’ or ‘allocations’ instead. This can be for set days or weeks or for a longer period of time. However the operator will only have responsibility for filling a smaller portion of the aircraft. Even when an operator owns its own airline it may part charter some seats to other operators to reduce the risk the risk of flying with empty seats.
Smaller operators may prefer to buy seats on specific routes on specific dates for a fixed price.
Alternatively they can part charter some seats and buy others on an as hoc basis. As computer technology improves, more and more small operators are opting for ad hoc arrangements which they can make themselves as and when they need to.
- Negotiation with hotels, transfers services
Although contacting for beds and flights seats is the most important function of a contracting department, contractors will also need to ensure that the right transfers form the airport to the hotels have been arranged, that ‘extras’ like car hire have been organised, and that items like travel bags and baggage labels will all arrive in good time for each departure.
Tour operators hire cars in the resorts by using their bulk-buying muscle to negotiate better rates with big name companies like Avis and Hertz than the clients could get themselves id they waited until they reached the resort to make a booking. More rarely they may make arrangements with cheaper local companies.
The next stage is:
A tour operator’s main source of income is the revenue it receives from its main holiday product, the package holiday or inclusive tour (IT). This revenue may come direct from the customer, if it is a ‘direct sell’ company, or, more usually, through a travel agent who will sell the holiday on behalf of the operator. A large tour operator such as Airtours may have a number of separate operating divisions, each of which will contribute to overall group profits; Airtours owns its own airline, runs camping holidays under the EuroSites brand and operates a chain of travel agencies under the Going Places banner. Mass market tour operators offer a wide range of holiday products catering for different sectors of the market. Although this range will vary from time to time in response to fluctuating demand, there is likely to be a series of products, which may include:
- A main summer programme
- A winter programme
- City breaks
- Flight-only
- Programmes featuring particular countries or regions, e.g the Caribbean
- Holidays geared to the youth market
- Programmes for ‘seniors’
- Budget holidays
- Specialist programmes, e.g golf or sailing.
Other resources of income to tour operators include:
- Interest on money held in account: Deposits for holidays are sometimes paid up to 12 months before departure and balances settled 6-8 weeks before the start of the holiday. This money accumulates for the tour operator who receives interest on its balances
- Commission on extras: Commission for items such as car hire, insurance, flight-only and excursions is generally paid direct to the tour operator. Most operators will offer their own insurance and car hire in their brochures, hoping to benefit from the higher commission levels that these two products attract.
- Currency dealing: Large operators may buy foreign currency in advance if rates are favourable to use later for payments to suppliers. Surplus funds can be invested to provide a return.
- Charges: Tour operator levy charges for cancellations and amendments to holiday arrangements, which are another of income.
Forecasts
The package holiday is made up of different components the tour Operator not only has to forecast what its own administrative costs will be but it also has to obtain, and agree, prices from hoteliers and Tour Operators have been remarkably successful in forecasting.
However there can be some factors that could not have been expected or forecast but which nevertheless can increase the cost of a holiday after the prices have been published in the brochure. Some of the recent ones have been the increases in landing fees an airport charges for security. Fluctuations in currency exchange rates affect the bills from hoteliers. If the pound sterling strengthened against, for example, the Euro, the Tour Operator hotel bills in Spain will be less. If the pound weakens the bills will be greater.
When all elements involved in the final inclusion in the brochure, this is sent to the publisher.
Here is a breakdown of the cost component of a package holiday:
Components of a package holiday
Miss Shela Begum and Miss Sharon Taylor, the two friends have looked and decided a holiday in Spain- Barcelona.
Accommodation
Miss Shela Begum and Miss Sharon Taylor have booked 2 single rooms with private baths and balconies. In a first-class hotel, they booked full board- (3 meals a day). The cost of their hotel, accommodation and meals account for 37% of the overall cost of their holiday.
Transport
The Tirados wanted to travel by air - with a return flight from their local airport to BCN Barcelona.
Important fact- 85% of package holidaymakers travel by air –being this, the fastest method of travel of getting to certain destinations.
Once Shela and Sharon arrived they will be taken-transferred by taxi from Barcelona airport to their La corona hotel, the transfer however is one extra service they pay for.They will also be transferred back to Barcelona airport on the last day of their holiday.
The cost (shown in percentages) of the flight seats 29% and coach transfers 2% the total cost of transport account for some 31% of the holiday cost.
This figures relate to Miss Begum’s and Miss Taylor’s holiday in Spain –the percentage-cost would vary for long haul flights –destinations for example the cost of the aircraft seat to the Far East will probably account for more than 50% of the holiday cost.
Tour Operator Costs
These are overheads or fixed costs -anticipated revenue from the sale of holidays must be set against the cost of salaries, heating, lighting, communications, advertisements, entertaining, cleaning of offices, contract payments, resort representative –one of the largest items of expenditure for any Tour Operator and so on.
The Tour Operator is aware that the resort representative is very important because clients may not speak a certain language or may need some one to guide them around or give them information on certain things, or perhaps book excursions or even help them with any other problems.
A total of 29 % of the Begum and Taylor’s holiday cost goes toward payment of these overhead costs, which usually include a 10% commission for the travel agent.
Profit
In order to maintain competitive, the Tour Operator should ensure that the profit margin remains as small as possible. Only 3% of the amount paid by Miss Shela Begum and Miss Sharon Taylor is set aside for profit.
For tour operators, the brochure is their most crucial promotional tool, providing detailed information, images and prices to potential clients, designed to persuade them to make a booking. In particular, brochures aim to:
- Accurately present products and services to the reader
- Supply product information to travel agents
- Convey and image of the company
- Offer a means of booking a holiday
- Explain booking and contractual conditions
- Present the information within the bounds of current UK and European Union legislation
Above all, brochures should be designed in such a way that they have the best chance of converting enquires into sales. Teams working in the marketing department will deal with brochure production staff to finalise design, copy and photographs. A lot of brochure printing takes place outside the UK to save on costs. Sales staff will make decisions about how many brochures are required and to which travel agents they will be contributed.
Selling and Marketing
When the brochure is back from the printers we commence the selling and marketing stage.
Sale Stage
Reservations staff are employed to handle bookings from travel agents and direct from the public. All large operators, and many small to medium-sized companies, use computerized system developed by in-house computer operations personnel or outside consultants. Staff in reservations are fully trained on the operation of the reservation systems and briefed on the features of products included in the operator’s brochures. Large tour operators will have separate reservations teams handling group bookings and last-minute bookings. Some specialist tour operators use manual reservations systems based on wall charts or index cards.
Post-Sale stage
Once the brochure has been launched, the members of staff involved in marketing have other brief to follow. A big amount of energy, time and money has already gone into the main selling tool, the brochure and it is now up to the marketing team to seat about telling everyone about their new programme of package holidays, tours or whatever, through an advertising campaign.
The two audiences to be considered at this point:
- the retail travel trade
- the general public
There is a need to make potential customers aware of what is on offer or available to them either indirectly through travel trade, or indirectly to the public.
‘Marketing and selling
Marketing staff will plan and co-ordinate a range of activities, including advertising in newspapers, magazines, Teletex and on the Internet, direct mail, product launches and sales promotion, to ensure that the operators’ products are given maximum exposure and sales opportunities. This may be long-term brand support or short-term advertising and promotion. It may involve advertising in consumer and trade arenas, or special point-of-scale materials in travel agencies to raise awareness of particular products.’
‘Agency sales support
Sales representative will regularly visit travel agencies and offer product training and point-of-scale materials, such as posters and window displays, in order to maximise sales opportunities. The travel agencies that sell the most holidays will receive particular attention, including enhanced incentives for management and staff to continue high volume sales.’ Quote Book –The business of tour operations
Author- Pat Yale
Advertising method
What is there to advertise?
- the general company image or
- a specific product e.g a special offers
Main forms of advertising :
- television
- radio
- newspapers and magazines
- Videos
- Posters
Television
This is by far the most expensive medium on which to advertise both in terms of preparing the materials and in buying space to show them. It is not enough to have the advert shown one; repetition will be necessary to hammer them message home.
Newspapers and magazines
Although the same advertisement sometimes appear in both the trade press and the national press, this cannot always be the case because the trade press adverts are meant to encourage sellers while those in the press are aimed directly at potential consumers. Newspaper advertisement are expensive and are therefore usually quite small and simple.
The aim of advertising in this case is to stimulate late bookings, through special offers and prices.
Promotional Advice
The agency is where the brochure is displayed and is vital for the success of the operator. The agency staff have to be aware of what the product has to offer the client.
The agent may be aware of an operator’s availability and be able to effect a booking on the spot.
Once brochures are at the travel agency, they must ensure that there are well stocked with brochures, well informed and well supported when queries arise.
Brochures distribution patterns will have been previously decided by the sales and marketing team leader, and non-productive agents may receive little or no brochures as a result of poor previous sales figures.
All operators pay agents commission to sell their holidays.Some operators pay overrides or extra commission according to volume of sales produced.However in order to motivate agency staff to sell more holidays,there are various incentives generally used.
Public relations
Public relations staff deal with all aspects of the tour operators liaison with the press and outside agencies. They will be responsible for organising press conferences, writing press releases and handling enquiries.
Pre – and post-departure customer service
This department will be responsible or handling complaints and queries from agents and members of the public. They will try to ensure that all matters are dealt with quickly and efficiently in order to retain goodwill. Often part of a major tour operator’s marketing department, the customer services teams are increasingly involved in analysing customer feedback. Relevant information is passed to appropriate UK or overseas personnel to ensure that mistakes are not repeated and that overall quality is enhance.
Recruitment and training
Recruitment
Tour operators mainly recruit their staff by advertising in the travel press TTG-Travel Weekly, although jobs in travel are so popular that they will also receive a lot of speculative enquiries about work from school and college students. Often they prefer to employ staff who have taken college courses in travel and tourism or who have had Saturday jobs in travel agencies which have given them experience of working with the public and of the travel business in general.
Must ensure Tempo Tours has well trained reservation staff place for brochure launch.
Recruitment and training of resort representatives
We must ensure resort reps/manager are in place to greet and to look after clients.
Resort reps who are going to work on the summer programme will usually be recruited between late autumn of the year before and January of the year in which they will start to work. Advertising will be placed between November and January, in the travel press TTG-travel weekly or other travel presses and some times in national newspapers as well. The first selection of candidates is usually made between December and February, with final selections in March. Extra reps may well be recruited from the reserve list to handle the peak July/August rush.
Training takes place at the start of April, with some of it in the UK and some overseas in the relevant resort. Training of reps will cover some or all of the following areas:
- The history of the company and an introduction to its policies
- A description of the job and what it entails
- Conditions of employment
- Advice about how to handle customers
- Introduction to administrative procedures and paperwork
- Information about the resort:
Airports
Transfer procedures
Accommodation
Fire procedures
Excursions
Merchandise
Holiday insurance conditions
What to do in an emergency.
The tour operator’s administration department is responsible for producing invoices, receiving payments and issuing tickets and other documentation.
Staff will also produce passenger lists, know as manifest, for distribution to airlines, hoteliers, ground handling agents and resort representative, plus carry out the full range of everyday administrative duties associated with the operation of a commercial concern.
Administration –Processing a booking
Reservations can be seen as one administrative function of a tour operating business. However, there are lots of other administrative requirements, many of them associated with processing bookings, collecting payments and ensuring all the correct documentation is despatched to agencies and direct clients in time for their departures.
- When a booking form is received, the reservations department will check details of the reservation for accuracy and sort out mistakes.
- It will then be passed to the accounts department for the costing to be checked and a confirmation produced.
- Accounts department staff will key details of the deposit required and any insurance premiums to be collected into the system; with a manual system the details will be typed up. They will also raise an invoice showing the balance to be collected and the date by which it must be paid. The company keeps one copy of the confirmation invoice .The travel agent keeps a second that will show the amount which must be flowered d to the operator after deduction of the agent’s commission and the insurance premiums. A third copy will be given to the client. Once this confirmation invoice has been produced the travel agent will become liable for the holiday costs and should therefore have collected enough money from the client to cover what is owed.
- Approximately ten weeks before the departure date final balance invoice will be run off. The travel agent will them have to collect the outstanding balance and send it to the operator with a remittance slip detailing the amount.
- Advice to client and those involved in providing holiday in the month before departure.
- The Client/Agent-tickets and other supporting documentation e.g. information leaflets, accommodation vouchers, car hire vouchers.
- Accommodation provider-list of names of those arriving on the specified date together with any specific requests, which they may have. The same information is sent to the Tour Operator or local agent
- Transport provider and representative at the terminal in the UK and overseas-a list of all passengers due to travel together with a note of any special handling requirements (e.g. unaccompanied children, invalids.
