Conduct a PEST analysis for a company within the Tourism industry.

Chapter 1

1.1 Introduction

The Tourism industry is one of the fastest growing industries in the world. The World Travel and Tourism Council estimates that in 2004 Travel and tourism is expected to generate

US$ 5,490.4 billion of economic activity
10.4% of total GDP
214,697,000 jobs or 8.1% of total employment
12.2% of total exports

My task is to conduct a PEST analysis for a company within the Tourism industry.

Within the tourism industry, I have to select one area of interest like transportation, accommodation and transportation etc. and then one company doing business with these sectors related with the tourism.

According to Leiper “Transportation is the only link between the tourist-generating region and destination region”So, transportation was a more interesting sector to discuss in the report but I tried to find a company which is related with all these main sub-sectors discussed above in the report.

I have decided to look in the U.K market for such company because “Tourism is one of the largest industries in U.K, worth approximately 75.9 £ Billion to the U.K economy in 2002 and supporting around 2.1 million jobs.”

During my research on internet I found many companies offering services in the tourism of U.K but I have decided to choose “Simply Travel” because of its variety of services offering related with the accommodation, transportation and attractions.

1.2 Problem Formulation

In the problem formulation part of my report I would describe the overall situation of the U.K Tourism industry. The service concept of “Simply Travel” will give us information about the services provided by the company. I will find out about the customers, competitors of the company. I will find out what political, economical, social and technological factors affecting the company and its demand situation.

1.3 Limitations

The biggest limitation for writing this report is time and the pages to write. It is a broad topic and it could be better presented if available more time and space to write about, but still I have tried to highlight some main points raised during my finding. My knowledge about the company “Simply Travel” is internet-based and I could not able to contact the company for further information. Due to the lack of information about the company I will only describe one component of the Service Management System. I will be describing only the OT part of the SWOT analysis.

1.4 Methodology

Being inspired from the Service Management System I will describe the service concept of the company .I will conduct a P.E.S.T analysis to find out the political, economical, social and Technological factors affecting the company. From SWOT analysis, I was conducting OT analysis to find opportunities for the “Simply travel” in future.

1.5 Data

I will use Secondary data collected from different industry reports available on internet for my report. Data provided in conducting P.E.S.T analysis has been taken from www.statistics.gov.uk.

Chapter 2

2.1 Simply Travel’s Service Concept

Established in 1978, Simply Travel has been providing travel solutions since 26 years for the discerning travels who want more from their holiday than just a decent tan. Not through the aggressive marketing tactics, but by providing an attractive alternative to mass-market package holidays has lead “Simply travel” to gain a big loyalty pool among the holiday travellers.

“Simply Travel” serves its customers with wide variety of holidays including destinations like Croatia, Greece, Italy, Morocco, Portugal, Spain and Turkey.

Services provided by the company are intangible but still physical tool ...

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Chapter 2

2.1 Simply Travel’s Service Concept

“Simply Travel” serves its customers with wide variety of holidays including destinations like Croatia, Greece, Italy, Morocco, Portugal, Spain and Turkey.

Services provided by the company are intangible but still physical tool and equipments used in operations are tangible if the customer visits the company’s for the services. To get a better understanding of the services provided by “Simply Travel” I will split the services into Core and Peripheral services.

Mentioning about the core services provided by the, company provides hand- picked properties to meet the individual needs of its customers. Ski holidays, winter sun, Family holidays (special locations for family holidays with child care) helpful staff, peace of mind and safety during the whole travel are the core services provided by the company.

Unparalleled service, late availability, nannies for kids , pleasant experiences for its customers are the peripheral services provided by the company.

2.2 Service Package

Service package provided by the company for different holiday travels includes all airport taxes, flights and transfers, accommodation including breakfast and meals and the service of its representatives.

Chapter 3

3.1 Customers

Holidaymaking is the main reason that UK residents travel abroad. As the company deals with the both inbound and outbound tourism I will have a brief look on the inbound and outbound market. Number of overseas visits by UK residents increased to 59.3 million in 2002.Expenditures by these visitors, excluding international fares £27.07 billion-slightly higher than the total for the domestic market (which includes fares).

Describing about the demographics of the customers, most of the customers are families with children and older people but latest trend has been seen in the youth to take holidays.

3.1.1 Customers’ Buying Behaviour

Continued concerns over safety and security while travelling are found in the customers for holiday travels. Tourists are increasingly buying experiences rather than a usual routine holiday. They try to find a particular activity.

The fuel blockades at U.K petrol stations, the events of 11th September 2001, the foot and mouth outbreak, SARS and Iraqi war has had continuous affect on the buying behaviour of UK market customers. Consumers are showing a continuing search for value for money from their holiday choices. Consumers expect more choice, individuality and variety.

3.2 Competitors

Aggressive marketing by low cost airlines and internet booking agencies present a big challenge for the holiday market. Airlines like British Airways are offering customers to make their own travel plans through internet. Travel agents compete in variety of ways i.e. price, quality and the package itself. Companies offer special discounted packages and also compete on branding. As there are hundreds of travel agents in the U.K market so, it’s difficult to specify the competitors in the market. Travel select, Expedia, Travelocity, E bookers and Thomas cook etc. are the big names in the market and occupy the bigger part of holiday sales for the U.K customers.

3.3 Market

I can say that market is in a state of perfect competition and no individual consumer and travel agent is in position to affect the market.

Key success factors for “Simply Travel” are

Effectively segmented and targeted adventure travellers market within the larger travel market.
Successfully positioned as travel specialists.
Personal interaction, media and marketing.
Repetition of customers, Loyalty pool

3.4 PEST analysis

To assess the market for the business of “Simply Travel” I will conduct PEST analysis to find out about the Political, Economic, Social and Technological factors in the external macro-environment.

3.4.1 Political Factors

Political arena has a huge influence upon the regulation of businesses .It includes government regulations and legal issues under which businesses should operate.

According to the findings, political environment of U.K. is quite stable.

Issues like enlargement of European Union and war against terror have had an effect on the political stability of the government.

In result of growing awareness of the environmental consequences, U.K Government is planning actions to ensure aviation reflects its environmental impacts. Proposals are emerging for a tax on aviation fuel and VAT on air tickets.

Government’s taxation policies and decision about the increasing the petrol prices have affected the buying power of the individuals in U.K.

The political decision as to whether a UK sign up to single European currency is again having an effect on the businesses.

3.4.2 Economic Factors

Economic factors affect the purchasing power of potential customers and also affect the individual company’s offerings.

U.K economy is benefiting form gradual low inflation rate. Inflation rate Inflation rate fell to 1.3% in February 2004.

In U.K, unemployment is low. According to labour market statistics in January 2004 fell down to 4.8 per cent. Job confidence is high and because of this confidence spending by consumer is also high.

Predictions point to continuing GDP growth over the period averaging around 2.4% a year (GDP rose by 0.9% in fourth quarter of 2003), with real household disposable income rising at a somewhat faster rate. Household expenditures rose to 0.9 per cent with the increase in disposable income.

The UK’s deficit on trade in goods and services in February 2004 stood at £3.2 billion –compared with the revised deficit for January of £4.4 billion.

Continued sales growth has been observed during the past few months in the UK economy.

Exchange rates are favourable for UK residents for travelling abroad due to strong position of British Pound against the other foreign currencies. “Euro” used as a single currency in many European countries, is also stable against the other foreign currencies.

Latest predictions for the UK economy suggest that it will remain one of the strongest economies in the world over the next five years, with low inflation (inflation fell to 1.3% during February 2004), low unemployment and reasonable economic growth.

The downside is that disparities between the wealthier parts of the country, not all in the south east of England, and pockets of deprivation, will get wider, with implications for travel demand.

These are likely to influence the growth of the UK resident travel market.

3.4.3 Social Factors

A trend of getting internet access at home and buying online is developing in the UK. According to statistics in September 2003, 11.9 million households online were recorded.

Listening to music or radio is a popular choice among the UK residents.92% of people content to spend their evenings and weekends watching TV or hired videos. To socialize, most people think to entertain family and friends at home rather than going out (79%).

A great trend has been seen in U.K population about diet and health issues in the recent years. This trend leads towards the need of more fitness clubs and organic food for the people from U.K Changes in the structure of the population because of the immigrants from Europe, Asia and Africa etc. will also affect the supply and demands of goods within the U.K economy.

Continued concerns over safety and security while travelling are found in the U.K residents.

Lifestyle changes have also been affecting the U.K travel market for a number of years. Postponing the start of the family and an increase in the number of households consisting of couples with two incomes are the main trends toward the changing life style. Changing fashions, which are difficult to predict also have an affect on the market.

3.4.4 Technological Factors

The rapid development of technology is affecting the businesses in UK and all over the world. Changes in the technology have changed the way businesses operate i.e. Internet booking for tickets and holidays. Faster changing development in technology creates a need to react quickly for different businesses in order they want to maintain the competitive environment by providing the same innovative services, which their competitors are offering.

Distribution of products by the use of technologies e.g. marketing information systems, customer relationship management are also common practices with different businesses for effective services to their customers.

Chapter 4

4.1 Impacts on demand situation

Findings from the PEST analysis will enable me to comment on the impacts on the demand situation of the customers of the “Simply Travel”.

Elasticities

Changes in the quantity demanded due to change in price and income are very important for the tourism industry. Rising disposable income among the UK residents is the positive indication for the “Simply Travel” that people will have enough money to buy company’s products.

However, Government’s fiscal policies for tax on aviation fuel and VAT on air tickets will impact the company’s supply of services at the same rate. Higher prices of the tour packages will lead to lesser demand among the UK residents.

Cross-Price Elasticities

Not only a price change in the UK due to taxes is important but also the price of the facilities in other destinations where company serves is also important. For example rising prices in Italy, Spain etc. for different tourism related products will also make supply of products expensive for the tourists.

Trends

Latest trends of home- entertainment and more awareness about the diet and health-issues does also have an impact on the demand of the tourist. Company will have to compile the Supplies of services packages with variety of facilities available according to individual’s choice, so it can make supply of the products a bit expensive for the customers.

Purchasing method

Growing direct purchases of holiday packages from airlines will impact the demand situation .Buying the package direct from suppliers i.e. Hotels, air lines will decrease the demand of the tourists.

Moreover, low inflation rate and high employment rate and favourable exchange rate will increase the buying power of the tourists so it will increase the demand in British holiday travellers for the holiday travels abroad.

4.2 OT analysis

To find opportunities and threats from the external environment for the “Simply Travel”, I will conduct the OT analysis.

4.2.1 Opportunities

Opportunities exist for “Simply Travel” in expanding the service package according to the latest trends such as

Packages with individual concerned Diet and health matters
Adding particular activities for the tourists, providing experiences
Providing more choice, individuality and variety.

And providing the real value for the money of the tourists.

4.2.1 Threats

Cheap airlines adding facilities for the travellers to make their own travel plan is the biggest threat for the company.

Government’s decision to add taxes on aviation fuel and VAT for air lines are also a main threat for the company.

Latest trends of home entertainment i.e. listening radio, watching TV, Inviting family and friends are also threatening the company.

Terrorist attacks like 9/11 is also a big threat for the company.

Chapter 5

Conclusion

I conclude my report by saying that the Holiday Travel market in UK is in a state of perfect competition. Though there are positive signs in the economy for present and near future and buying power of the individuals is increasing day by day but still “Simply Travel “ is in need to expand its service package according to the latest trends.