Category: Free Essays

Globalization of the world market brings new possibilities as well as enormous hurdles for both established and young businesses. With the emergence of international entrepreneurship, entrepreneurs are concentrating on specific issues that they face operating in complex environments affected by diverse national cultures and institutional influences (Johanson & Vahlne, 2009). New global entrepreneurs depend on global networks for resources, distribution, and designs for growth. International entrepreneurs realize that success in a new marketplace requires agility, ingenuity, and certainty with a global viewpoint to acquire sustainability. Thus, global thinking is beneficial since foreign business clients can choose ideas, products, and services from many countries and cultures. However, entering into a foreign environment and culture can also become an obstacle psychologically in and of itself for the individual international entrepreneur (Mitchell et al., 2002). This paper will examine two areas that focus on the importance of cultural understanding in international entrepreneurship. The first will comprise of how entrepreneurs who expand into international markets must know how to think globally in order to design and adopt strategies for different nations as a business ventures into an uncertain market. The second part will explore how psychological adaptation of the individual entering a foreign culture is interconnected with the international entrepreneur.

Entrepreneurs can expand their business by participating in the global market; as every year thousands of small business enterprises are actively engaged in the international field. International entrepreneurship studies have started to focus on specific topics that confront entrepreneurs as they expand their new ventures (Zahra, Korri, & Yu, 2005). The definition of ‘international entrepreneurship’ in this paper will focus on the process of creatively discovering and exploiting opportunities that lie outside of a firm’s domestic markets in the pursuit of competitive advantage (Zahra & George, 2002); across national borders, to create future goods and services (Oviatt & McDougall, 2005). This meaning incorporates the process aspect of international entrepreneurship, which focuses on a central issue of why some individuals exploit international opportunities while others equally well placed do not act on them (Zahra, Korri, & Yu, 2005). Globalization is a process fuelled by increasing cross border flows of goods, services, money, people, information, and culture (Held et al., 1999, p. 16). However, the use of this term will refer to Guillen’s (2001) definition of globalization as a process leading to greater interdependence and mutual awareness among participants in general. Guillen (2001) combines the understanding of globalization as the intensification of consciousness of the world as a whole, and as the ‘diffusion of practices, values and technology that have an influence on people’s lives worldwide’ (Guillen, 2001).

Noticing opportunities is normally more difficult in international settings, and the level of uncertainty that the potential entrepreneur must undergo will also be greater. Entrepreneurs able to function successfully in international settings may be both more skilled at noticing opportunities and have a greater capacity to endure the uncertainty associated with international entrepreneurship (Lu & Beaamish, 2001). Noticing opportunities is normally more difficult in international settings, and the level of uncertainty that the potential entrepreneur must endure will also be greater (Coviello, 2006).

Oviatt and McDougall (2005) emphasized that international entrepreneurs display the intention to compete in multiple locales at the inception of the firm to exploit existing international opportunities and would have the intention to do so when they started their firms (McNaughton, 2003). Starting a firm is a difficult process under the best of circumstances. International business scholars have traditionally argued that internationalization is difficult because firms had to overcome a liability of foreignness, although Johanson and Vahlne (2009) have recently acknowledge that being part of an effective network and prior knowledge can greatly accelerate the international entrepreneurship process. This liability of foreignness was based on the fact that firms and entrepreneurs lacked knowledge about doing business in other countries, which meant they had to endure the costs of learning and the discomfort of uncertainty (Lu & Beaamish 2001). However, by positioning themselves in relevant networks, or because of their past experience, many entrepreneurs have high levels of operational knowledge about foreign markets. In this manner, the traditional approaches for dealing with the liability of foreignness of either imitating local firms or by transferring unique organizational or managerial competences to their foreign unit (Sapienza et al., 2006) have been supplemented with a knowledge component, which is more related to uncertainty. There has been an acknowledgement that firms could begin to internationalize sooner and Sapienza et al. (2006, p. 915) suggest that “the earlier a firm internationalizes, the more deeply imprinted its dynamic capability for exploiting opportunities in foreign markets will be.” Others have pointed out the benefits of internationalizing earlier, or at least exporting at an earlier stage (Kundu & Katz 2003). This may be because although there is a cost to learning, early entrants begin this process sooner (Autio, Sapienza, & Almeida, 2000) and at least some suggest they should do this before they actually start the firm (Coviello, 2006).

An entrepreneur who would like to take advantage of international markets may have to study a foreign language, may have lived abroad and may be face with culture shock. Entrepreneurs must realize their company’s competitive advantage such as: technology, price, financial superiority, or marketing, product innovation, an efficient distribution network or possession of exclusive information about the foreign market (Sapienza et al., 2006). Declining market conditions at home may cause entrepreneurs to seek foreign markets to help their business. Successful global entrepreneurs should have the following characteristics: a global vision, international management experience, innovative marketing or technology processes, a strong international business network, and effective organizational coordination worldwide (Lee, Peng, & Barney, 2007).

When global opportunities occur, entrepreneurs are likely more open-minded about internationalizing. The advantage of international trade is that a company’s market is expanded much and growth prospects are greatly raised. Other advantages include minimizing seasonal slumps, reducing idle capacity, getting knowledgeable about products not sold in target markets, technology used in other countries, and learning about other cultures (Johnson, Lenartowicz, & Apud, 2006). Before going to a foreign market, it is essential to study the unique culture of the potential consumers. Concepts of how the product is used, psychographics, demographics, and political norms as well as legal normally differ from an entrepreneurs’ home country (Miller & Parkhe, 2002). De Tienne & Chandler (2004) suggest that entrepreneurs must consider five factors relative to the country and cultures that the business venture will inhabit. First, they must study foreign government regulations: patent, import regulations, trademark laws, and copyright that affect their products. Second, they must know political climate: relationship between business and government or public attitudes and political events in a given country affect foreign business transactions. Third, they must consider infrastructure: packaging, distribution system, and shipping of their export product. Fourth, they must research distribution channels: accepted trade both retail and wholesale, service charges and normal commissions, distribution agreements and laws pertain to agency. And fifth, they must study competition: number of competitors in target nations and their market share, as well as their price, place, product and promotion. Additionally, they must find market size: of their product stability, size, country by country, and know what nations are markets expanding, opening, maturing, or declining (De Tienne & Chandler, 2004). Eventually, entrepreneurs must understand culture of their products. Small businesses can study international cultures by business travel, participating in training programs, reading the current literature, and undertaking formal educational programs. Small business, who wants to sell product on a worldwide basis must realize different standardization in each country. In some cases, goods must be adapted for different local markets if it is to be accepted and consumer goods always require much more adaptation (Johanson & Vahlne, 2009).

One issue related to international opportunity is why individuals in home countries are not the ones that take action on these opportunities, which would seem logical, as they are better positioned to notice. This question is especially important because research indicates that local firms usually have higher levels of performance than do foreign firms (Miller & Parkhe, 2002). While the matter of liability of foreignness is present in some cases, this relates to firms competing in the same industry. Thus, when locals begin to imitate the foreign firm, they may in fact end up with higher levels of performance, because of factors such as lower lawsuit awards (Mezias, 2002). However, national average levels of entrepreneurship to uncertainty, opportunity, and cognition uncertainty avoidance are not identical across countries (Hofstede, 2001). This suggests that although it is possible that both a local and foreigner notice a specific opportunity at the same time, the local may not act for both the fear of failure and stigma attached to that failure in certain cultures (Lee, Peng, & Barney, 2007). Thus, the potential entrepreneur must also be willing to endure the uncertainty associated with acting on these opportunities.

To gain insight into effective professional task performance across cultures, an understanding of effective communication and psychological adaptation has to be complemented by an exploration of the effect of culture on task process. Over the last few years studies on cross cultural competencies in different professional fields have started to emerge.

Examining the relationship between national culture and entrepreneurship is an important emerging subject matter in international entrepreneurship (Hayton, George, & Zahra, 2002). The sociological viewpoint on entrepreneurship proposes that entrepreneurs are intertwined in a social framework and their cognitive process and behaviours are shaped by the interactions between the environment and entrepreneur (Zahr, Korri, & Yu, 2005). There is also evidence of the impact of national cultural values on the characteristics and behaviour of individual entrepreneurs (Mitchell et al., 2002). Mitchell et al. (2002) confirmed that entrepreneurs share a set of cultural values, regardless of their national origin or cultural background. However, it appears that whilst some core values are shared across different countries and cultures, some of the behaviours of individual entrepreneurs reflect the value system of their respected national culture.

With regards to adaptation in international entrepreneurship, entering into a foreign environment is not a transition for the business venture alone. The actors, international entrepreneurs, involved are also plunging into same the foreign environment (Hofstede, 2001). Entering a new culture means commencing to share a pattern of thinking, feeling, reacting, and problem-solving (Saee, 1999). Cross-cultural psychology argues that unfamiliar cultural territory negatively affects an individual’s affective, both the sense making and cognitive mechanisms, and undermines the appropriateness and effectiveness of their behavioural responses (Maznevski & Lane, 2004). This happens when individuals are unable to accurately perceive and interpret the alien cultural environment, nor explain or predict the behaviour of people with different cultural backgrounds (Maznevski & Lane, 2004). Evidence suggests that exposure to a foreign cultural environment can cause ‘culture shock’, a psychological condition which adversely affects psychological and affective states (Johnson et al., 2006). Saee (1999) contends that opportunity identification competencies developed in an entrepreneur’s home cultural environment may not be sufficient to perceive a high level of entrepreneurial self-efficacy about performing the task of identifying opportunities across borders and cultures.

Cross-cultural studies have explored the challenges that a foreign cultural environment poses to human behaviour, cognition, and professional performance. Human behaviour is considered the coping mechanism that individuals consequently develop. Some researchers suggest that building this coping mechanism, in individuals, amounts to developing a global mindset or cultural intelligence (Maznevski & Lane, 2004; Early & Mosakowski, 2004). According to Maznevski and Lane (2004, p. 172), a global mindset is ‘the ability to develop and interpret criteria for personal and business performance that are independent from the assumptions of a single country, culture, or context’; then to adequately implement those in different countries, cultures, and contexts. Cultural intelligence is seen as the ability to interpret the foreigner’s behaviour the way the foreigner’s countryman would (Earley & Mosakowsi, 2004). Cross-cultural competence is defined as the appropriateness and effectiveness of one’s behaviour in a foreign cultural environment (Mitchell et al., 2000). Psychological adaptation is considered the centre point of personal traits and attributes that help generate internal responses in an unfamiliar environment by managing stress (Saee, 1999). Successful adaptation to a host cultural environment requires the abilities to be mindful, to tolerate ambiguity, and the ability to explain and make accurate predictions of strangers’ behaviour (Saee, 1999). This also includes the levels of anxiety and uncertainty that affect the intercultural encounter (Saee, 1999).

CONCLUSION:

International entrepreneurs actually face greater uncertainty than is generally common in more established businesses, which benefit from learning and experience, because international entrepreneurship is about the implementation of a new innovative business. There is an uncertainty to entrepreneurship and the role it plays in initiating the process. Mitchell et al., (2000) observes that entrepreneurial action is a result of overcoming and paralysis that is caused by the uncertainty that precedes the entrepreneurial act. Guillen (2001) adds that the key concept that entrepreneurs create new combinations, which become the innovations that are the engine of economic growth. The entrepreneur is likely to see the opportunity as relatively certain. This is important with regards to international entrepreneurship in that exploiting an international opportunity requires more than dealing with operational certainty; there is also a high level of cultural uncertainty that the entrepreneur has to endure to ensure the new venture’s prosperity. The volume of research on international entrepreneurship supports the notion that a period of domestic development is no longer necessary for many firms and that international entrepreneurship is possible at the time the firm is established or shortly thereafter. However, consideration must be taken with respect to the foreign culture a venture will go into and the psychological affects upon the entrepreneurs joining in the venture.

Effective operation in the globalised economy requires that entrepreneurs develop new skills and competencies. Some of these skills and competences are needed to deal with national and regional cultural differences that are becoming intense with the continuance of globalisation (De Tienne & Chandler, 2004). (Authors) believe that current and future international entrepreneurs need to develop cross-cultural competence to successfully identify business opportunities.

A tour operator combines tour and travel components to create a holiday, it designs travel routes for tourists and offer perfect arrangements of the airlines and hotels. In a word, a tour operator offers package holidays. A travel agent is a kind of retail business which is a buyer of tour operator, it sells travel-related products and services to customers on behalf of tour operators, airlines, hotels and other entities. Nowadays, tour operators and travel agencies are closely related to each other. Some tour operators own the distribution channel, they set up retail shops selling products and services directly to the final customers, or they establish close relationships with travel agencies under contracts. The development of the industry should be attributed to the development of transportation in the early age. With the invention of aircraft, the demand for travel increased rapidly. But in recent years, situations become more complex than ever before in such a changeable economic climate, UK’s tour operator industry are fluctuated in growth. This part of report focuses on the market and development during the year 2005-2008. The Association of British Travel Agents (ABTA) was formed in 1950 by 22 leading travel companies, now represents over 5,300 travel agencies and nearly 1000 tour operations. Its Members range from small, specialist tour operators and independent travel agencies through to publicly-listed companies and household names; from call centres to internet booking services to high street shops, occupy more than 90% of the British market. Thus statistics of ABTA can be used to conduct this report. According to the annual report of ABTA, during the year 2005-2006, bookings through ABTA members were 6% down on the prior year. The package holiday market continued to decline but specialist holidays, cruise tours and flight-only bookings all grew significantly. Company failure level rose substantially from 33 in the previous year to 47 this year. The industry structure changed a lot: independent agents turned to favour dynamic packaging with concentration on niche markets including long-haul, cruising, UK holidays and self-packaging. Big operators drove bookings online and through their own retail networks. 2006 is one of the most challenging years in the industry’s history, with traditional business model under great pressure and uncertain future for many others. During the year 2006-2007, 32.8A million overseas visitors who came in 2007 spentA ?16.0A billion in the UK, the volume remained stable but spending fell in cash terms for the first time since 2001. Financial statuses of ABTA members were quite positive: total net current assets of ?5.11 million (6% up) and total income of ?5.70 million (13% up). Company failure levels fell dramatically from 47 to 32 compared to the previous year. Several weaker players in the industry have been winnowed out of the market but the figures are still very encouraging. The industry remained in good health. Consolidation and merger activity has been a key feature of the outbound tourism market in 2007. New business models had made that the differences between the tour operator and travel agency become increasingly blurred. 2008 is again a challenging time for the industry: at one time the fuel price had reached $150 a barrel which is the double of the price in 2007; sterling lost a large amount of its value against most currencies; what makes things worse is that the credit crunch caused the world’s economic downturn, consumers changed their spending patterns, companies struggled to survive. In spite of these factors, UK outbound visits remained increase by 1.5 million from 69.2 million last year to 70.7 million this year. The number of company failures fell from 32 to 30 compared to the previous year. But unfortunately, because of the high cost of fuel, the UK’s third largest travel group-XL Leisure Group collapsed on 12 September 2008 leaving 85000 passengers still on their holidays. This failure resulted in one of the most extensive repatriations in the UK travel industry’s history with 85,000 passengers being flown home in a joint action by TUI, Thomas Cook and Virgin orchestrated by the CAA. Another important issue happened in 2008 is the merger of ABTA and the Federation of Tour Operators (FTO) which represents the continuing integration of travel agency and tour operator within the industry. The industry will benefit greatly from the combined different strengths that both organisations offer. The FTO’s experience and expertise in operational issues fit ideally with ABTA’s traditional functions.

PEST analysis of the remote environment
(P)olitical/Legal
3.1.1 Political instability and Terrorism

Political instability is described as a condition of a country where a government has been toppled, or is controlled by factions following a coup, or where basic functional pre-requisites for social-order control and maintenance are unstable and periodically disrupted (Cook 1990). It is clear that the political instability in a certain country is negatively influencing travelers’ decision making with prospective travelers seeking substitute travel plans. It will reduce the demand for travel significantly as tourists concern about the safety first and nobody wants to travel in a dangerous environment that strikes, wars and terrorists attacks happen. Among all the factors influencing political instability, terrorism is the most significant one that affecting tourism in UK in recent years. After the heart-broken event of terrorist attack on 11th September 2001, the concern about safety in travelling is increasing rapidly. A series of coordinated suicide bomb attacks on London’s public transport system during the morning rush hour happened on 7th July 2005. The discovery of two car bombs set to detonate in London’s bustling theater and nightclub district Friday, June 29th, 2007 has encouraged residents to remain alert. Following that case, a jeep rammed into a Scottish airport in Glasgow on June 30th, forced Britain to raise the threat level to “Critical” -the highest alert status. All of the events listed above had negative influences on tourism in UK and businesses of UK’s tour operators. Report said that 15% of the advanced bookings were cancelled during the summer peak travel time in 2007.

Government and Tourism

Government always participates in tourism activities through several kinds of ways: government makes policies for the development of tourism industry; government makes policies that will have impacts on tourism industry. In this part, the report will address issues like the carbon tax influences on the industry, VAT effects on the industry and financial incentives government used on the industry.

According to Conservatives 2007, aviation contributes just 5.5% of the UK’s CO2 emissions but emissions from UK aviation increased significantly by more than 90% between 1990 and 2004. Government urged to take measures to reduce the negative impact of carbon emissions on environment: from 2001 to 2007, the original APD which is at a rate of ?5.50 on flights from the UK to elsewhere in the European Union and the European Economic Area and ?22.00 for other flights was introduced; a new tax which doubled these charges was introduced from February 2007. These changes in carbon taxation would result in changes in prices of travel products using aviation and finally affect the demands for travelling and sales for tour operators. According to Karen Mayor and Richard S.J. Tol, due to the changes in February 2007, countries near the UK would see a small drop in visitor numbers, and the UK itself would see a larger drop (1.2%). The recent doubling of the boarding tax will reduce arrivals by some 528,800 people in 2010, this is a 1.3% reduction (Karen Mayor, Richard S.J. Tol, 2007).

UK government applies a rate of 15% VAT (Value Added Tax, temporary cut from 17.5%) which is the standard rate on tourism products, while most other EU countries apply reduced rate of VAT around 5% on tourism products. Report said that a cut to the 5% UK reduced VAT rate on tourist attractions admission and accommodation will boost employment and result in gains of up to ?760 million savings in increased income and corporation tax. It also predicts an additional ?440 million will be injected into the industry supply chain.

The Government had announced an 18% cut in funding for VisitBritain over the next three years on October 2007. Tourism Alliance Chairman, Ros Prichard OBE, stated “This cut in funding means that, in real terms, the Government will have reduced VisitBritain’s funding by around 50% between 1997 and 2011.” That is a catastrophe for UK’s tourism industry, VisitBritain will be lack of funding to advertise and promote UK’s attractions, financial incentives to the industry had been withdrawn and other capital allowances had been reduced, while funding for VisitBritain had been cut back just at the time when they were needed the most, the growth in sales of the industry will suffer.

(E)conomic
3.2.1 National economy and disposable income (impact of economic recession)

The world is now suffering from the economic downturn caused by financial crisis, businesses collapse, jobs are destroyed, UK’s economy is significantly influenced by the crisis. According to National Statistics Online, UK’s GDP contracted by 1.6% in the fourth quarter of 2008 when the crisis started. It is now 2% lower than the fourth quarter of 2007. For the year 2008 as a whole, GDP rose by 0.7 per cent with a down trend of 3% in the previous year. UK’s economy is experiencing the worst recession in over a century. The recession is a disaster for employment in UK, unemployment rate rose to 6.7% (0.6% higher than the last quarter and 1.5% on last year). 29.3 million people were in work in the period December to February according to the labour force survey (LFS). The number of people employed fell by 126,000 this quarter and down by 227,000 on the last year. All the situations listed above lead to the decrease of national income and disposable income. Tourism is sensitive to economic uncertainty and downturn: most travel activities involve disposable income, as total income drops, disposable income drops, people would conserve their money to cover the cost of life essentials, food, shelters and family necessities. The demands then decrease making tour operators suffer.

3.2.2 Fuel price

Fuel cost is a major cost of airline companies, the cost will be paid by customers as fuel surcharge. Tour operators will raise the price of their products, especially for long-haul products when fuel price goes up. The travel enterprises will then be in danger of losing customers. When international crude oil price hit the record of $148 a barrel in September 2008, both airline companies and travel enterprises struggled to make ends meet. The fuel surcharge of some long-haul flights was even same as the ticket price, this might change customers behaviour at some degree, people may stay closer to their home or switch to other entertainments. The economic crisis UK encounters leads to a substantial decrease of oil price which could possibly boost travel industry to some extend though the major influence is negative.

3.2.3 Exchange rate

The exchange rate, or the value of the British Pound relative to the currencies of other countries, has had a significant effect on both inbound tourism and outbound tourism. In 2007, the weak dollar makes UK accommodation and food more expensive for visitors from America, the exchange rate put London 15th in its popularity table in July 2007 – down from number seven a year earlier according to Cheapflights. Due to the recent Pound depreciation, visitors from other European countries or America can expect to pay around 30% less than they would have done a year ago. British Tourist Authority (BTA) produced a study on ‘The Price Sensitivity of Tourism to Britain’, the findings show that overseas visitors are highly sensitive to changes in the cost of staying in Britain: for every 1% movement in the exchange rate which increases the cost of staying in Britain, the UK’s international tourism earnings will decrease by 1.3% (?160m). Research also found that more fixity in the exchange rate arrangements generates a positive effect on tourism and the more fix the exchange regime is, the greater the impact on tourism (Maria Santana-Gallego, Francisco J. Ledesma-Rodriguez, Jorge V. Perez-Rodriguez, 2007).

(S)ocial

Social factors like age, changing life style affect the industry through changing consumer behavior.

3.3.1 Age and tourism

According to United Nations Statistics and National Statistics Online, for the whole world, since 1950 the proportion of older persons has been rising steadily, passing from 8 per cent in 1950 to 11 per cent in 2007, and is expected to reach 22 per cent in 2050; For UK, the percentage of the population of state pensionable age exceeded the percentage of the population under 16 for the first time in history in 2007. The industry now is facing an older growing society due to rising life expectancy, marketing of the industry should focus more on older persons: the advertising and products should target more at older persons.

3.3.2 Changing lifestyle

There is a growing trend of buying online which could reduce a person’s shopping trip frequency, the access to the world’s products through internet reduces the flows of shopping tourists from one city to another or cross countries. More and more people tend to prefer clubs or watching TV at home rather than going out for a trip at weekends.

3.3.3 Growing concern about environment

Tourism is one of the largest industries in the world with incredible developments each year, it contributes a lot to the world’s economy while the huge infrastructural and resource demands of tourism (e.g. water consumption, waste generation and energy use) can have severe impacts upon local communities and the environment if it is not properly managed. A concept: sustainable tourism which is defined as ” tourism which leads to management of all resources in such a way that economic, social and aesthetic needs can be fulfilled while maintaining cultural integrity, essential ecological processes, biological diversity and life support systems” by World Tourism Organisation becomes more and more popular. People concern more about the environment, they tend to favour ecotourism products. When developing new tourism products, tour operators should design their trips to be environmentally, culturally and socially friendly.

(T)echnological
3.4.1 Technology development of transportation

With the development of piston engine aircraft, the mass tourism boomed in 1950s. Transportation technology is always regarded as crucial in the development of tourism, places inaccessible before by car or train can be accessed swiftly by air. It is largely due to the improvement of transportation that tourism has expanded. The highlight of a trip is usually the experience in destination, visitors often neglect the process of getting to the destination. In this case, the faster the visitor can reach the destination, the more attractive the destination will be. The development of transportation especially the speed of the transportation tool will have a major impact on long-haul travel.

3.4.2 Internet and the industry

The world enters a new information era with the development of internet technology. The world’s internet users are increasing sharply. According to Internet World Stats, there were 43,800,000 internet users in UK in March 2009 which represents 70.9% of the population, that is a 180% growth from the year 2000. Internet has become an essential part of people’s life. For tour operators, internet provides tour operators platforms of advertising and transaction, which can make their products more accessible to the customers thus bring more sales and profits. Moreover, it is cost-effective and time-efficient using the internet. For customers, internet makes it easier for them to browse the products and make bookings. More and more people are now booking their holidays on the internet, tour operators need to focus on the website design as well as the security of the transaction system.

The internet technology makes it possible for meetings online, different companies can communicate or negotiate with their counterparts more efficient through videoconference. Face to face contact is not compulsory anymore. Business travel will suffer from that, there might be a decline in business travel sales for tour operators.

3.4.3 Virtual Tour

Another developing technology which will have a strong impact upon tourism is virtual reality (VR), which is a technology allows a user to interact with a computer-simulated environment. Most current virtual reality environments are mainly visual experiences, displayed either on a computer screen or through special stereoscopic displays. According to Chemistry & Industry technology news (March 2009), recently, Mobile aroma recreation system (MARS) devices, developed by researchers at the University of Warwick, UK, could be used to recreate these detected odours for VR users in real-time with the help of electronic noses. Electronic noses could one day be incorporated into virtual reality (VR) systems to add realism to simulations of holiday experiences. The new technology will make VR much more real than ever before, enable customers to experience the whole “live” holiday at home. On one side, virtual reality leads to the risk of diminishing the interest for travel; On the other side, “Virtual Reality can be used to recreate historic sites and events for such purposes as education, special project commissions and showcase features at national and World Heritage visitor centres. VR technologies are also being used to provide a means of protecting the fragile state of some heritage sites, helping to educate visitors not so much about their history but in how to explore, interpret and respect them,” says Professor Bob Stone, Scientific Director of Virtual Presence Limited, based in Manchester, UK.

Though tour operators can’t change the remote environment, they should change their strategies to adapt to the environmental changes.

Porter’s 5 forces Analysis of the competitive environment

UK’s tour operator market is a quite mature market with four major players. After a long history of consolidation, Thomson Holidays (part of The World of TUI group), Thomas Cook, MyTravel Group (formerly Airtours) and First Choice dominate the tour operator market in UK. The industry is full of vertical and horizontal integration, vertical integration includes forward integration-acquisition of the retail network namely travel agencies, backward integration-acquisition of suppliers like airlines, hotels and transportation companies. Horizontal integration includes mergers between big companies and mergers between big and small tour operators.

Michael Porter (1980) developed a framework for industry competitive analysis, consisting of five different competitive forces which refer to microenvironment. The frame work is shown in the figure below:

4.1 Threat of new entrants

Tour operator industry is an industry which has relatively high entry barriers. UK’s tour operator market is quite mature and its vertical integration had finished in the 1990s. Today all major tour operators in UK are highly vertically integrated and operate their own travel agencies, airlines, hotels and resorts, transportation companies and so on. Some of the tour operators become quite large multinational enterprises, they can reduce transaction cost due to large amount of orders, they enjoy the benefits of quantity discount and economies of scale. They always have esteemed reputation for organizing good tours. When people have demands for travel, they turn to those tour operators, people recognize their brand thus will be loyal to the companies. All of the factors mentioned above reduce the threat of industry entry, however, the threat still exists. With the individualistic change of demands and the changeable nature of tourism environment, new players are entering the tour operator industry focusing on niche markets. They supply special products designed for customers with special needs. The new players always rely on product quality to gain competitive advantage as well as filling gaps between new demand and supply. Ecotourism and adventure tourism was introduced by those new players. In order to expand the market share and cope with the threat new player had brought, major player began to purchase the niche operators, series of mergers happened within the industry: Headwater is a tour operator specialized in organizing cycling holidays and walking holidays which enables customers to explore at their own pace. Simply Travel is a leading specialist tour operator in UK offering an off-the-beaten-track alternative to the package holiday, creating inspirational holidays and providing a high-level of personal service. Thomson acquired both of the two companies as departments of Thomson Holidys; Panorama used to be the largest tour operator in Ireland for Winter Sun departures from Ireland and Irish Ski holidays, it became one part of MyTravel Group and was given the responsibility of managing Manos Holidays after it was also acquired by MyTravel; First Choice took control of Meon Holdings specialized in villa holidays and Sunsail which is a tour operator specialized in watersports clubs, Yacht charter and Flotilla sailing. Large players can enhance their brand name attractiveness and achieve a long-term sustainable competitive advantage through acquiring new specialist players.

4.2 Rivalry among existing competitors

The industry competitive environment has changed due to industry’s horizontal integration, which is a tour operator offering one or several travel products takes over another that offers very similar travel products or services. The industry’s competitive environment among existing competitors used to be full of disordered competitions, players competed with each other focusing on low price, they cut their price as much as possible to gain market shares, the whole industry became profitless and all the players suffered from that. In addition, their product quality was quite low due to the reduction on cost, they tried to keep their profits at a certain level while the prices they offered must be low. After industry horizontal integration, situation has changed: mergers and take-overs not only take place among small and large tour operators but also happen among large tour operators. According to Air Travel Organisers’ Licensing (ATOL) 2007 figures, the four big players in the industry occupy more than 80% of the tour operator market shares: Thomson accounts for 28% of total market shares while MyTravel Group has 21%, followed by Thomas Cook with 19% and First Choice with the proportion of 17%. All the four big tour operators offer full-range products from domestic holidays to outbound holidays, from business travel to leisure travel, from normal sight-seeing holidays to specialist holidays, differences among the four players are not significant. Companies compete with each other mainly based on brand identity and creating brand loyalty, a good brand offers distinctiveness and consistency to its target customers, thus branding strategy becomes dramatically important in companies marketing strategy to expand market shares. MyTravel Group launched “freedom card”-a kind of bonus card offers its members discounts bonus points and upgrades in order to maintain customer purchase and loyalty; Thomson also sought a way to keep their customers loyal to the company by setting up Founders Club – new shareholders were given membership in the “Thomson Founders’ Club” which offered a 10% discount on Thomson holidays. Exit barriers of the industry are high due to some reasons listed below: Though investments on non-transferable fixed assets are quite low, redundancy costs are very high because those large travel companies often have a large number of employees thus it costs a lot to dismiss employees, in addition, there will be significant social problems if such large companies go bust. Those large tour operators usually have close relationships with their suppliers and buyers under restricted contracts, the penalty costs would be significant if they break the contracts.

4.3 Threat of substitutes

The development of information technology especially internet has brought new opportunities and threats to the tour operator industry. Through using computerized reservation system (CRS), tour operators can obtain efficient information distribution systems and networks. Internet plays an important role in purchasing holiday products in terms of provision, accessibility and flexibility.

With the emergence of internet technology, a kind of online holiday booking website was created. It can be seen as a kind of substitute to the traditional tour operators. Online holiday booking websites like Expedia.co.uk and Lastminute.com offers designed holiday routes, air tickets booking, hotel booking and so on just like what traditional tour operators do but in another much more efficient way. Customer can gain great benefits through using the new technology on booking, they have more choices and have easier access to the holiday products. The major tour operators are not resistant to the technology and are now investing heavily on their own virtual networks: MyTravel Group announces its intention to launch a new interactive digital television channel to be called ‘Going Places TV’ and finally it was launched on channel 669 in February 2003; Thomson, recently enhanced its main website with a series of new features and content, in an attempt to retain customers and encourage them to book through the site. It also introduced additional editorial content to help consumers, as well as to enable the site to be picked up by Google in natural searches. Takeovers and merger are quite common: MyTravel Group acquired WorldChoiceTravel.com (WCT), a fast growing, US based provider of travel reservation services in March 2001; Thomson acquired a teletext operator – Travel House in order to gain control of the virtual marketplace.

The technology of internet makes information shared much easier and more widely than ever before, people can gain knowledge about the destination, the way to get there and accommodations there by easily clicking on the relevant websites. Information asymmetry no longer happens in recent years, the usage of tour operator becomes less and less. Cheap budget airline companies and online hotel booking websites provide travelers opportunities to get low-price air tickets and accommodations, these are really threats to tour operators. People tend to organize their own trips, they choose their own destinations, drive their own cars, book hotels from hotel websites or booking websites or even live in their own houses, they will experience more freely holidays through doing that. There is a growing trend of using this do-it-yourself (DIY) approach in travelling which could be a substitute of tour operators. Most travelers concern about price when making decisions, when there is no price advantage booking from tour operators, travelers tend to favor DIY travel. Major tour operator like Thomson, MyTravel, Thomas Cook, First Choice offer a range of products featured with free concept, with only air tickets and hotel bookings at a low price with their popular trusted brand names.

4.4 Bargaining power of suppliers

The bargaining power of the industry’s suppliers should be described as low. On one hand, there are few tour operators in the industry to bargain with: suppliers like independent hotels and airline companies widely exist in recent times while only few tour operators are operated due to the consolidations within the industry, the suppliers don’t have too much power bargaining with the major tour operators but still have certain degree of bargaining power on smaller tour operators. On the other hand, vertical integration with the hotels, airline companies and other transportation companies makes the bargaining power of suppliers at the lowest point. The backward integration enables tour operators to establish close relationships with their suppliers by signing contracts of cooperation or even the purchase of the suppliers: First Choice launched its own airline quite early in 1987 which represents the beginning of forward integration, in 2000 a joint venture with Royal Caribbean Cruises Ltd is announced and later a company called Island Cruises was set up and put into operation in 2002; MyTravel Group acquired Europe’s biggest resort complex, the Bellevue Hotel in Majorca, which comprised of 17 blocks of apartments and 8 swimming pools in January 2000. In June 2001 the company announced strategic alliance with Aqua Sol Hotels Limited, a leading hotel group in the Eastern Mediterranean. The Group’s in-house airlines – Airtours International and Premiair – begin to trade as “MyTravel Airways” in May 2002. Thomas Cook owns Thomas Cook Airline and has a fleet of 45 aircrafts, the company has a partnership with SENTIDO Hotels & Resorts – the international hotel chain based on a franchise concept with 4-star plus beach hotels. The major tour operators all participant in the dynamic areas of tourism, there are few needs to bargain with suppliers, in a simply word, tour operators are “self-sufficient”.

4.5 Bargaining power of buyers

The bargaining power of buyers should also be described as low. The buyers being discussed here stands for travel agencies not the ultimate customers due to the nature of the industry. The most important factor that affects bargaining power of buyers is forward integration between tour operators and travel agencies. According to Bloomsbury Business Library – Business & Management Dictionary, forward integration is a means of guaranteeing distribution channels for products and services by building relationships with, or taking control of, distributors. Forward integration can free the supplier from the threat or influence of major buyers and can also provide a barrier to market entry by potential rivals (Business & Management Dictionary, 2007). Through forward integration, major tour operators take control of the distribution channel, they can sell their products in a more efficient and cost-effective way. Forward integration of tour operators and travel agencies makes it increasingly difficult for smaller independent tour operators who can’t reach their customers through high street travel agencies. As major tour operators all have their own travel agencies, independent tour operators rely on independent travel agencies. The number of independent travel agencies is declining because they can’t offer customers the same discount as the integrated chains, in this case, independent tour operators can’t compete with major tour operators on price, the number of smaller independent tour operators also decreases. The development of internet technology also has an important impact on the bargaining power of buyers, it has changed the pattern of traditional distribution, shocking the market by the rapid transformations which it generates across the whole industry. These days, the online travel market is experiencing a profound evolution. Trends in overall online travel market size are shown below:

Now the bargaining power of buyers is being threatened by “disintermediation” – the elimination of intermediaries, for example, the wholesalers found in traditional retail channels, in favor of direct selling to the consumer (Bloomsbury Business Library – Business & Management Dictionary, 2007). The disintermediation is caused mainly by the development of internet. Major tour operators have embraced the growth of online travel systems and the need for fast and efficient distribution systems and networks, they have built their own online distribution channels like websites and

There is a saying , “Customer is God” which means customer’s needs should be fulfilled by the goods or service provider so that the customer can become your loyal customer. As to the hotel industry, it is also very true that hotel staff should try the best to satisfy all demands and requests from the guests so as to keep the guests come back often and introduce their friends and relatives to step in the hotel. However, not all customers are easy going and sometimes customers may bring up difficult requests which are not able to be met by the hotel, thus it will pose a great challenge for the hotel staff to handle.

In this way, the relevant hotel department, here referred as the front office under the room division will often be responsible for processing such requests and complaints. The way how the customer’s requests and complaints are handled is very important for the hotel’s development regarding its reputability and sustainability in this field. Therefore, the aim of this report is to highly focus on the reasons of such difficult requests and complaints and the solutions which will properly get the issues handled without offending the customers and making them satisfy with the services of the hotel. It also addresses the significance for the hotel to be able to handle the complaints and requests in a proper way. In the final part, the report has drawn a proper conclusion for such challenge discussed and analysed.

Table of contents

Introduction 4

Discussion about the reasons and forms of the difficult requests and complaints brought up by customers 4

The ways how the Front Office staff should face and handle such challenge 6

Significance for the hotel to handle the challenge in a proper way 7

Conclusion 9

References 10

Introduction

With the development of various businesses and tourisms, different types of hospitality industries such as business hotels, holiday inn hotels, have been rapidly developed and expanded in the cities all around the world. Since the massive expansion in this hospitality sector, the competition between hotels with the same level is becoming more and more intensified. Therefore, to improve the service trying to satisfy every customer whenever stepping into the hotel to the best is becoming vital in the hotel management (Kandampully, Mok & Sparks, 2001). However, no matter how well the hotel staff made the preparation and how much efforts they made for trying to meet the customer’s needs, there are still many challenges in terms of handling the actual incidents in the real situation. With the consideration of addressing the challenges which might be encountered by the hotel staff, this report picks one typical challenge that the hotel room division department will occasionally face to analyse. The challenge is identified in the report is how the difficult customer’s requests and complaints are processed by the relevant staff. Usually the requests and complaints are handled by the front office staff under the room division department of the hotel. Such difficult requests and complaints from customers are very common for the hospitality industry. In the report, it is to write about such typical challenge to be handled by the front office staff in a business hotel.

Discussion about the reasons and forms of the difficult requests and complaints brought up by customers

In hospitality industry, it is very hard for the hotel not to have any incidents occur since the hospitality sector is dealing with different types of people. Take a Business Hotel as an example, one large Business Hotel will receive thousands of customers each year. All of the customers are with different characteristics or from different countries with obviously different cultures. Even the best and most reputable hotel may not be able to make every customer satisfy with its service. Usually, it is more occasional for the Front Office under the Room Division Department to contact the customers directly. And more often requests or complaints from customers will be delivered to the Front Office and the staff is responsible for handling such incidents.

The reasons why sometimes customers will propose some hard requests or even sometimes they directly make complaints about the hotel is not difficult to understand. From the perspective of customer, he/she spends money on the food and services in the hotel, therefore, customer may think he/she should deserve more convenient and better service. And the more money he/she spends in the hotel, the much higher expectation with respect to the services he/she will have for the hotel. This is the psychological reaction of human being. During the hotel service process, if the customers feel the actual experience of the service is not up to the expectation they set in their mind, it will cause customer’s dissatisfaction (Bardi, 2010). Although most of them will not reveal this mood and leave the hotel without a word, some of the customers will complain to the Front Office. Also since different customers are greatly different in their living background, behaving methods, characteristics, they will reflect a different needs for the hotel services. Meanwhile, as the evaluation of hotel services by each customer is subjective, evaluation of the same services may vary from person to person. Thus not all the customer’s needs can be fulfilled and nothing is perfect, the diversity of the lodging customers absolutely ensure that there will be difficult requests and complaints (Hsu & Powers, 2001).

During the hotel service, a hotel may confront many forms of difficult customer’s requests and complaints. There are difficult requests such as late room service, asking for some facilities which are not equipped in the hotel etc. Typical complaints are like unclean room, unreasonable phone price, poor facilities, bad-quality food, language misunderstanding, unhelpful staff and so on (Ahmed, 2005).

The ways how the Front Office staff should face and handle such challenge

When encountering the difficult customer requests and complaints, Front Office staff may feel great stress for handling such incidents especially when dealing with some hard customers. It is a great challenge for the employees to handle the requests and complaints properly without offending the customers and to ensure Hotel’s interests at the same time. To handle these incidents in a proper way, the staff should firstly have a right attitude about the challenge. To deal with such unprepared incidents is one position’s responsibilities. Requirements and complaints made by customers should be regarded as gifts to hotel. Customer’s requests and complaints not only reflect the needs of customers are not fulfilled by hotel, but also provide an opportunity for the hotel to evaluate its service quality and management quality in various aspects (Barlow & Moller, 1996). It actually provides a good chance to improve hotel in many ways, which will eventually enables the hotel with an outstanding performance and to be very competitive in the lodging industry.

For Front Office staff, it is a knowledge to well handle the difficult customer’s requests and complaints. Normally the staff can resolve the incidents with reference to the following guidances according to different complex situation.

When customers ask for some hard requests which may not be achieved within the hotel’s limit, customers may feel frustrated and disappointed. Usually customers will not deliberately make some unreasonable requests, therefore, when the staff face such requests, they should firstly try to satisfy their customers if the requests are not ridiculous. If hotel can not meet the customer’s requests, the staff should make apologies to customers in a polite way. The staff should keep the requests down on the notebook and assure the customers that the hotel will improve its service or add the requests in the service range (Malhotra, 1997). Actually the requests are also the advice for the hotel. It can make the hotel perfect its services. For instance, now there are more and more women business travellers, women have more requirements than men in terms of lodging and food and so on. Women customers may ask hotel to prepare better hairdryer and healthy meals. In other situations, hotel may have some disabled persons who will demand more special requests from the hotel. Normally if customer’s difficult requests can not be provided by the hotel and the staff refuse them in a very polite way, most of the customers will not be annoyed. However, if the customer’s requests are refused by the staff without any explanation, customer will make complaints because they feel his self-esteem is devalued.

When dealing with the complaints, the staff should be very careful because if the complaints are not handled properly, the hotel will lose not only one customer. When customer complains, the hotel should handle the complaints immediately and take the complaints seriously. Hotel staff should carefully listen to the customer with complaints with a wholehearted attitude and deal with the complaints after being agreed by customer. After investigation, if it is found fault with the hotel, apology and proper compensation shall be made in order to get forgiveness from the customers and make them satisfy with the hotel again. The staff shall keep in mind avoiding conflicts with customers. For the serious incident, the staff shall comfort the customers firstly then report to the manager and handle it according to the complaints procedure. Every complaint should be integrated in a file and analysed so that it can become a material for training as typical cases (Heung & Lam, 2003). After the complaints are resolved, hotel staff should appreciate the customers for pointing out the improper ways of the hotel, which makes the hotel improve itself. Then the customers will feel good impression about the hotel again and will come back for next time.

Significance for the hotel to handle the challenge in a proper way

To properly deal with the difficult requests and complaints is crucial for hotel’s success and development. There are plenty of hotels established in the city, why the customers would come back if they feel they are not treated in a good manner. For hotel, to offer a good service is one thing, to resolve requests and complaints in a good manner is another key factor for its reputation. Resolving the problems effectively has a strong impact on the customer satisfaction and loyalty. Customers will possibly satisfy with the hotel based on the recovery efforts made by the hotel (Liao, 2007). There are numbers of hotels becoming good players in the lodging industry because they know how to deliver their services to customers and how to ensure guest satisfaction about their services or even how to handle the guest complaints successfully and gain back the customer’s trust about their hotels. Therefore, these hotels survive in the competitive accommodation area.

Especially at present, technology develops fast and Internet is used by most people around the world. If one hotel failed to handle the guest’s requests or complaints, the offended customer may spread bad words via Internet, which will greatly destroy the hotel’s fame and potential customers may choose the other competitor by viewing these comments (Piccoli, Spalding & Ives, 2001). Besides this, once the customer feel negative opinion about the hotel, he/she will deliver this message to his/her friends and relatives. For example, when we check the hotel information via Internet, we will occasionally see some messages or comments made by other people. These bad words will definitely make us feel not good about the hotel, although some of them may not be true.

While on the other hand, if the hotel can try to fulfill the requests of the customers, hotel will gain considerable profits and will definitely build a good reputation in the hospitality industry. Take London Hilton in Park Lane as an example. Since now there are more and more women business travellers who have specific needs and requirements different from those of male guests. These women guests highlight good health diet and fitness facilities and they require more appropriate facilities in their rooms, such as padded hangers, good lighting and full-length mirror. Therefore, London Hilton refurbished the 30 rooms on its 22nd floor to become an all-women zone and offers a private section for them and enhance the security. The rooms are facilitated according to women taste including fashion magazines, powerful hairdryers and others (Carysforth, 2003). As a result, the London Hilton Hotel is popular by most of the women travellers. Proper handling customer’s complaints and make the complaining customer feel he/she is respected also helps the hotel to build its reputation and win back customer’s loyalty.

Conclusion

In conclusion, the hospitality industry most often deal with people. In order to survive in today’s intensively competitive business environment, it is very essential for hotels to ensure to achieve customer’s satisfaction. As people’s increasing sense of protecting his consumer rights, many complaints occur in the hotel service. Also because hotels provide products and services which may be perceived in different ways by different people, different people will have varied levels of opinion in responding to the same or similar service and product consumption. Complaints sometimes do good to the hotel if the hotel is able to solve the problem in an effective way. If not, complaints will contribute a very bad influence to the hotel. However, for the Hotel Room Division sector, it is very challenging for them the properly deal with the matter. The persons for undertaking such position should be experienced and well-trained in this area. The capability of handling the complaints and difficult situation is not only about personal traits but also about tacts and strategies. The hotel staff should be familiar with the relevant strategies or procedures when handling the difficult and complex issues. It is also the hotel’s fortune to have such excellent staff being capable of solving complaints.

The tour operating sector of the travel and tourism industry is an important but frequently overlooked influence on many issues relating to tourism studies. Marketing, tourism planning and development, financial management and consumer behavior are among those areas to feel such influence. Tour operations forms a dynamic industry sector characterized by expansion, intense competition, mergers and acquisitions, all of which have been pivotal to industry development and product offerings over the past 20 years. Many operators have looked to other countries for business expansion. There have been several mergers and take-over between tour operators in the UK, Germany, Scandinavia and elsewhere in Europe, which have brought both advantages and disadvantages for many industry players. For several years, the UK travel industry has been characterized by intense competition which has resulted in many mergers and acquisitions.

The emergence of a sophisticated and innovative travel industry was a key factor in the growth and development of international mass tourism, with the tour operating sector in particular leading the way in both creating and meeting the needs of tourists. More recently, of course, a variety of factors, including the increasing supply of ‘no-frills’ flights, advances in information technology, widespread use of the Internet, and a more confident and experienced travelling public, have all contributed to an increase in independent travel. However, the continuing role and influence of tour operators should not be underestimated, particularly the pivotal position they occupy within the tourism system.

1.2 Types of Tour Operators
Outbound Operators

Outbound operators are travel from the generating country to another country this means who are residents of a country visiting other countries and travel for tourism purposes. This type of tourism also known as international visitors A high exchange rate for the pound sterling means lower costs for tour operators buying services in foreign currency. It also encourages UK outbound tourists but discourages inbound tourists.

Inbound Operators

This type of tourism is also known as International visitors and Incoming operators who are residents of countries other than that being visited and travel for tourism purposes. The Incoming tourism helps the country to gain more income

Domestic Operators

This type of tourism is also known as residents visiting destinations within their own country’s boundaries who travel for tourism purposes. Estimates of the size of this sector of the market vary because in many countries domestic tourism is not adequately measured at present. Within the total volume of domestic tourism, same-day visits are the most difficult to quantify. In most developed countries the frequency of day visits is already so great that it is not easily measured by traditional survey techniques, because people find it hard or impossible to remember the number of trips they have taken over a period of months or even weeks.

To summarize, the total market for travel and tourism comprises three main elements: international visits inbound to a country; outbound international visits made by a country’s residents; and domestic visits including day visits from home. The total market has grown rapidly in recent years and is now very large, encompassing the great majority of the population of economically developed countries. Frequent, repeat purchases of travel and tourism products in a year are already a normal experience for many people. Share of voice Compares an organization’s advertising spend to the total market spend on advertising. In the UK, domestic tourism and inbound tourism have a small share of voice compared to outbound tourism. Individually, micro-businesses are insignificant as players in international and domestic tourism and recreation. In practice they are often ignored in national and regional tourism policy developments. Collectively, however, they provide the bulk of the essentially local ambience and quality of visitor experiences at destinations on which the future growth of overseas and domestic visits depends. They also comprise a seed bed of entrepreneurial and enterprise ‘culture’ that is highly relevant for destination marketing.

Direct Sell Operators

There are few tour operators who use to sell their holiday package using the tour agent. The tour operators have sold their package to public directly, because this can offer great value. The consumer can think that this will cost than buy the package directly from the tour operators. But the truth is they will not add any commissions to their package. The consumer can buy cheaply from the tour agent.

1.3 Current Trends and Development

The big challenge in tourism is that it is difficult to define the typical travel, tourism and hospitality organization. This is, in part, because tourism is an amalgam of subsectors such as transport, accommodation, attractions, services and tourism facilitation, each of which consists of a number of different groups.

Tourism organizations also vary greatly across national boundaries. There are some emerging global or multinational companies in tourism, and the sector is affected by trends towards globalization in business, for example, the major airline alliances such as Star and Oneworld. However, the vast majority of operators are greatly influenced by the political, economic, socio-cultural and technological context within which they are located, generally at a national or local level. They are subject to variation as a result of differing political conditions, varying company and consumer laws and the influence of cultural considerations, for example, attitudes to alcohol in Islamic countries. Tourism organizations also operate within a highly volatile demand environment, primarily exhibited through seasonality but also through demand fluctuation within the week (business hotels and airlines at weekends face a major downturn) and within any working day. This characteristic demand curve imposes significant constraints on the management of human resources within tourism

Tourism organizations belong within the service sector of the economy. They are, therefore, very different in the way they operate and how they are organized from organizations which focus on the processing and production of manufactured goods. There are particular features of service organizations, and the services that they provide for their customers, which differentiate them from the manufacturing sector. These features establish the parameters within which people work and are managed in tourism.

In the short term it seems likely that the battle among the larger operators for market share will continue and the smaller independents will have no respite from their perpetual struggle to survive. Presumably, existing competition legislation will prevent more mergers that compromise the consumer’s interests.

1.4 Special Interest Holidays

There are number of tour operators provide number of special holiday packages. By searching on Internet we have identified that there are many organization in UK providing special holiday packages.

ABTA The Travel Association provides many offers to their customer. For an example “3 nts New Yorker Hotel New York” which allow the tourist to stay for 3 days in New Yorker Hotel with the standard facilities.

Figure 1.1 The Holiday offer given by ABTA

ResponsibleTravel.com: This organization provides family holidays for their customer. It has number of packages. Eg: Self Catering Accommodation for 2 or 3 people

Figure 1.2: Self catering accommodations for 2 or 3 people

Travel Navigator: this site helps the tourists to find packages in various sites. This site includes the sites for holiday packages for tour operators, general tour operators, specialist tour operators and for dynamic packaging.

AITO: This site also providing number of holiday packages. Eg: Taj Express with on the go tours

FTO: Federation of tour operators also provide holiday packages for long term planning

BITOA : The British Incoming Tour Operators Association providing tour operators and tourism supplies to UK.

First Choice: This operator provides holiday packages for family and adults.

Thomson: This operator also provide holiday packages in different level such as, luxury holidays, family holidays, spa holidays, and cheap holiday. This allow the consumer to select their desire package

ABTA: providing package for travel to Maldives

2.0 Task 2
2.1 Developing Package Holidays

According to Richard, S “A package holiday is simply defined as the pre-arranged combination of two or more components of a holiday, such as transport, accommodation and other services (for example, local sightseeing tours)”. Thus, although package holidays (and, hence, tour operations) are most commonly thought of in terms of charter flights to summer-sun destinations, it is important to recognize the enormous variety of types of package holiday.

The rapid growth in online sales (e.tailing) has not only further complicated the chain of distribution but also served to limit the power of intermediaries. Many online businesses (dot.coms), such as expedia.com or lastminute.com, sell a variety of travel and tourism products (allowing customers to create their own package holiday), while principals themselves, such as budget airlines, also offer links on their websites to other products, such as accommodation, car hire, insurance and entertainment. They can be categorized by:

Mode of transport: package holidays include transport by air (ITX or ITC), sea, rail, road or car/bicycle hire.

Type of accommodation: any type of accommodation may be component of a package holiday.

Services included: from basic flights and transfer to the ‘all-inclusive’.

International vs domestic: numerous tour operators cater to domestic markets.

Distance to destination: while short haul destinations account for the majority of package holidays by air, there is an increasing demand for long haul packages.

According to Richard, S There are three stages in the construction of a package holiday:

First Stage: Research must be under taken into market trends, existing products and competitive supply, and destination research to establish the feasibility of developing a new product in a new destination.

Second Stage: This involves the actual creation of the package, broadly embracing four areas of activity:

capacity planning, including both setting target capacity figures and contracting accommodation and aircraft seats

financial planning, including the critical process of pricing holidays

sales and marketing, particularly brochure production

Administration, including establishing reservation systems, recruiting resort-based staff and processing initial bookings.

Third Stage: During the first full season, a variety of activities occur, including:

holiday management

customer care

account payment to suppliers

2.2 Different Components of the Package Holiday and Different Type of Tour Operators

Principals in the travel industry, such as hotels and airlines have various choices for distributing their products. They may, for example, deal directly with the customer through the Internet, sell through a tour operator or use other methods.

Tour operators choose the accommodation, the range of excursions, the routes, the choice of airline and the prices. The better the balance between the interests in the exchange process, the smaller the marketing expenditure will need to be as a proportion of sales revenue, and vice versa. For example, if a tour operator has accurately designed, priced and judged the capacity of a programme, sales will be achieved at a relatively low promotional cost. If, for whatever reason, the price is too high, the product design uncompetitive or the capacity excessive for the available demand, only massive promotional expenditure and discounting will bring supply and demand back into balance.

There are many types of package holidays available in the world. And the each package can be suit for different type of tour operators. We have seen that there are domestic tourism, inbound tourism, outbound tourism, and direct sell available. Currently 4 biggest tour operators are available. Those are, Thomson, First Choice, MyTravel, and Thomas cook.

These package holidays are structured by tour operators. It also sold by travel agent to the consumer. Package holidays are available for domestic purpose which create packages for the tourists who want spent their holidays within their country. For this kind of tourists the tour operators create packages such as, luxury train tour, wildlife holidays, adventure holidays, yoga & meditation, luxury cruises, houseboat tour, luxury tour and so on.

The inbound tourism, residents of countries other than that being visited and travel for tourism purposes. This kind of tourism helps the country to gain more income. To attract this kind of tourists, it is the tour operator’s responsibility to create attractive package holidays. This package has to provide all the facilities to the tourists. Such as accommodations. Summer holidays, family holidays and a tour to taj can be categorized under this inbound packages

The outbound tourism, travel from the generating country to another country this means who are residents of a country visiting other countries and travel for tourism purposes. The outbound packages include summer holidays. This packages has to satisfied the own country’ tourists who plan to visit some other places.

2.3 Costing of the Package Holiday

In order for a business to survive over the long run, the average prices charged must be high enough to generate sufficient revenue to cover all fixed and variable costs and provide an acceptable return on the assets employed. Operating costs, expressed as average costs per unit of production, are therefore a primary input to all pricing decisions and they provide at least a nominal target floor for prices, below which they should not fall.

Tour operators have to create packages for different costing, because people cannot buy the same packages. The below figure shows an cost details of the package holiday.

2.4 Major Tour Operators in UK

In UK there are number of tour operators are available. Such as Association of British Travel Agents (ABTA), Association of Independent Tour Operators (AITO), Federation of Tour Operators (FTO), British Incoming Tour Operators Association (BITOA) Civil Aviation Authority (CAA), etcaˆ¦

AITO (The Association of Independent Tour Operators)

AITO is one of the best tour operator in UK.

The aim of AITO members is to provide the premier level of customer satisfaction by concentrating on three main pillars: Choice, Quality and Service, enshrined in the association’s Quality Charter.

Companies admitted to AITO are all vetted and fully bonded for client’s protection, in compliance with UK and European regulations. They are also bound by AITO’s own Code of Business Practice. AITO’s tour operating sector has undergone a process of integration. At AITO this has occurred in two directions.

Horizontal integration: where tour operators purchase/take over other organizations at the same level within the chain of distribution (i.e. other tour operators).

Vertical integration: where tour operators purchase/take over other organizations either higher up the chain of distribution (i.e. principals, such as airlines or hotels) or further down the chain (i.e. travel agencies). These are sometimes referred to respectively as backward and for ward integration.

Horizontal integration provides a tour operator with:

economies of scale

increased market share

the opportunity to strengthen through expansion

The opportunity to strengthen through diversification.

Vertical integration provides a tour operator with:

economies of scale

continuation of supply

the ability to control quality

Control over distribution and merchandising.

Task 3

3.0 Brochures and Methods of Distribution

3.1 Brochures

Promotion is a key aspect of event marketing. The brochure is the most important promotional toll in tourism. .A full rage of brochures and printed material is explaining different aspects of the products. Brochures plays a role in attract new business tourism events to the country. The brochure commitment is inescapable, and so also is the retail agency support system to achieve the given volume of sales.

Brochures such as those provided by tour operators are designed to stimulate customers and motivate them to buy. They identify needs, demonstrate in pictures and words the image and positioning of products and organizations, and carry the key messages. In this role they act in the same way as advertising. They also perform a vital display function in the racks of distribution outlets, such as retail travel agents, where they serve in lieu of physical products. In the typical self-service shops run by most travel and tourism retailers the display role, and the customer appeal of brochure covers and contents, are vital to marketing success.

The brochure is the product at the point of purchase, especially for first-time customers. It establishes expectations of quality, value for money, product image and status that must be matched when the product is delivered.

When preparing a brochure we have to find answer for the following.

Identify the purpose of this brochure.

Identify for which product that this brochure suits.

Identify the target audience

Define the style, contents, color themes for the brochure.

3.2 Methods of Distribution

Distribution comprises ‘access’, points of sale and convenience for customers. Travel and tourism is one of the few ‘pure’ global information industries. Intangibility at the point of sale places great weight on the role of information provision and the industry is especially well placed to profit from the new developments in ICT. From exposure to advertising messages, through the selection of information and evaluation of options and prices; from the placing of a booking, payment and receipt of confirmation and tickets, right up to the point of departure on a visit, all the processes are conducted by exchanges of information. Currently, and increasingly, the exchanges take place between computers that also finalize the settlement of bills and store information about customers on databases. Distribution channels provide:

Points of sale and convenient customer access, either for immediate purchase or for booking in advance.

Display and distribution of product information such as brochures and leaflets – or multi media information that may be accessed and down-loaded via the Internet (providing choice for customers).

Sales promotion and merchandising opportunities, especially special deals on prices responding to yield management programmes.

Advice and purchase assistance, e.g. itinerary planning, suggestion of options and helpful product knowledge.

Arranging transfer of title to a product through ticketing and travel documentation, or provision of a unique reference number that can be presented at the point of delivery.

Receiving and transmitting sales revenue to principals.

Possible provision of ancillary services, e.g. insurance, advice on inoculations, passport assistance.

Sources of marketing intelligence for producers, often including building up consumer databases.

May be used as part of a principal’s advertising and PR campaigns.

A route for receiving and assisting with complaints from customers, or directing them to another source.

Call centers:

Sophisticated ‘call direct’ telephone information and booking systems, often employing dozens or hundreds of people in places where property prices and staff costs are relatively low. India has become a key destination for such centers that can provide services all around the world. Call centers are used to deal with enquires and bookings directly from consumers and are the core response mechanism for advertising campaigns offering direct access via phone numbers. Increasingly linked with Web sites to process information requests and e-commerce, call centers are also used to create and manage consumer databases.

Website:

A site created on the Internet by a business to provide motivating information and possibly e-commerce facilities for customers. Each Web site has a unique address that may be accessed direct or by ‘search engines.’

Internet:

Internet into the distribution pattern makes a fundamental difference since it both adds a flexible new low cost channel of almost limitless capacity and joins up seamlessly what previously were essentially discrete operations. Principals that dealt exclusively in the past with tour operators/wholesalers may open their own Web site and deal with some customers direct. The Internet and call centers will be the linked routes for privileged cardholders.

Travel Agents:

Travel agents or retailers are, along with tour operators, intermediaries in the tourism system – in fact, in the UK at least, a significant proportion of travel retail outlets are owned by tour operators. Travel retailers have, for many years, played a vital role in the supply of travel and tourism products and, despite the significant challenges posed by the Internet and the consequential threat of disintermediation, continue to do so. Therefore, the role of travel retailers within the travel and tourism chain of distribution is to sell a variety of travel products to the general public or, in the case of business travel agencies, to corporate clients. Typically, travel retailers have sold airline tickets, rail/bus tickets, package holidays and hotel rooms, as well as a variety of ancillary products, such as car hire, travel insurance and foreign exchange. For all products sold, retailers receive a commission payment from the principal although, more recently, there has been a move towards reducing levels of commission, particularly for airline tickets.

Direct Sell:

Direct selling means the ‘selling of goods and services, which involves direct communication between the producer and customers, without the use of retail outlets, distributors, wholesalers or any other type of middleman’. This form of selling, a forerunner of modern methods, was always more significant in UK but it was effectively used as a way to shift products more cheaply than using alternative third party forms of distribution.

Task 4

Strategic and Tactical Decision Making

Successful marketing in travel and tourism depends upon balancing tactical and strategic marketing. For airlines, hotels and tour operators, tactical marketing (utilizing tools such as yield management) is a vital activity to ensure remaining capacity is sold. At the same time, however, long-term strategic marketing is also necessary to develop new products or brands so that the organization remains competitive.

Strategic Decisions

Strategic decisions are focusing on long-term product development, such as introducing new destinations in winter-sun program. The strategic decisions involved in five main elements:

Forecasting demand.

Finding ways to reduce costs

Building corporate product and brand strengths.

Relationship.

Strategic linkages.

The strategic decisions will vary for each tour operators. Since the domestic tour operators has define decisions for their purpose. The tour operators have to define the strategic decisions according to their level. The tour operators has to make following strategic decisions.

estimates of future traffic flows will always be surrounded by risk because of the unpredictable nature of the business environment. But the better the operator’s knowledge of customer profile and behavior, the better the chance of reducing the risk.

Determining the size, profile and needs of the target audience

Paper quality, choice of colors, density of copy, graphics, and the style and density of photography are varied in practice to match chosen images to selected target audiences. Up-market target groups respond better to heavier quality paper, lower density per page, pastel colors and thematic photographs. Down-market target groups are more influenced by bold colors, direct and straightforward copy and are not put off by greater density per page. Web site and multimedia design decisions are similar in principle having regard to the possibilities of the new medium rather than print.

Specifying brochure/Web site objectives.

Deciding the method of distribution.

Tactical Decisions

Tactical decisions are focusing on short-term problems and solutions, such as reducing the price of a holiday to maintain sales. According to Middleton,V Clarke, J Passenger transport marketing responds to seven specific external factors over most of which the operators have only very limited control and not much influence. These factors are listed and four of them are briefly discussed below:

Vehicle technology (major innovations).

Information and communications technology.

Regulatory framework.

Price of fuel.

Economic growth or decline (national and international economy).

Exchange-rate fluctuations.

Environmental issues.

Tactical decisions includes

Focus to secure on a daily basis

Segment specific promotions: The success of promotion is directly related to the knowledge that marketing managers achieve of the profile, needs and the probable behavior of the customer segments with which they deal.

Tactical pricing

Managing crisis

According to The World Tourism Organization (WTO), Tourism is currently the largest industry in the world. The World Tourism Organization (WTO) is expected there is going to be 1.6 billion worldwide tourists by 2020, compared to 2002, there is only 715 million worldwide tourists in 2002. Therefore, a lot of countries, no matter under developed and developing, tourism main source of foreign currency earnings and creating job opportunities for people.

According to McIntosh et al, tourism can be classified as the figure of the phenomena and relationships take place from the dealings of tourists, hospitality service provider, business dealer, the host governments, the origin of the governments and local communities in the process of attracting and hosting these tourists and other visitor.

According to Page, tourism as a consumer activity is continuously being developed by the tourism industry and person businesses, as marketing is used to develop new concept, products and services and destinations. This reflected in the international interest in developing niche products: holiday days focused on specific interest and activities.

Murphy argue that, as the tourism grew in size and scope it become obvious that this industry, like others, vie for limited resources and capital, that its non-consumptive attributes did not necessarily avoid the corrosion or modification of attractions.

2.2 Sustainable Tourism

Sustainable tourism model is related to the ethic of sustainable development, which in conjecture supported that people struggle to meet their own needs, most probably measured against the standard of living currently enjoyed (World Commission on Environment and Development, 1987). Sustainable development can defined as the sum of the trade-off between the need s and objective of the present, and those of the future (Archer and Cooper, 1994). According to Butler (1993), he challenges the use of the term sustainable tourism, in spite of its currency, arguing that it implies the maintenance of tourism itself, whatever its impacts, rather than the maintenance of the human or physical context within which the tourism occurs.

According to Butler et al supported the term sustainability tourism development, involving tourism which is development and in such a way that area (community and environment), in such a scale, it will remain practical in an inaccurate term, not reduce or change the phenomena (human and physical), of which there is such a level, its success development and prohibited activities and processes as well as other benefits.

Clarke (1997) suggested that the development of the idea of sustainable tourism involve four approaches which are polar opposite, whereby sustainable tourism and mass tourism were seen as polar opposites; a range, whereby sustainable tourism and mass tourism were no longer seen as polar opposites, but rather it was acknowledge that there were different shades of sustainable and mass tourism, which would merge at the middle; movement, an approach which suggested that positive action could make mass tourism mare sustainable; convergence, is the idea that all types of tourism can strive to be sustainable. (J. Swarbrooke, 1999)

2.3 Ecotourism

Every researchers and authors have the different description and definition on the term of ecotourism. Out of the variety of definition about ecotourism, there is one of the most quoted definition came from Hector Ceballos-Lascurain (1987:13). He defined that, the ecotourism or also known as ecological tourism can classify as a kind of tourism that involves travelling relatively without interruption. Ecotourism also can defined as travelling to pure natural areas with the main purpose of studying, admiring, and take pleasure in the natural landscape and its wild flora and fauna as well as any obtainable cultural aspects (both past and present) that can be found in these area.(Luck, 2003)

Ceballos-Lascurain (1990) also argued, nature-oriented tourism means scientific, aesthetic and philosophical move toward to take a trip, even though ecological tourist is not a skilled scientist, artist or philosopher. The most important reason is that the individual who carry out ecotourism has the opportunity of getting closer with natural environment in a manner usually not existing in the city life that normally full of pressure. (Weaver, 2009)

Based on Stanford Research Institute (1990), the ecotourism characterized as the fastest growing sector of the whole international tourism industry, it has increased rate of 30 per cent per year. Ecotourism observed the impacts, both positive and negative, of domestics and international tourism. Other than that, ecotourism is also a kind of tourism product that promotes protection and support sustainable development whilst having a minimum impact on the environment. Ecotourism also involves travelling to distant locations to learning the flora, fauna and wildlife animal in their native habitats. It also gives the chance to see how local people live and work. (Abraham, 2010)

According to Hundloe, to summarize, good understanding of services, cultural sensitivity and involvement with the local community are the three main issues which differentiate ecotourism from its cousins – green tourism and sustainable tourism.

2.3.1 Significance of Ecotourism

Sierra et all (1999) believed, ecotourism can be describe as ‘one of the most potential tools in the arsenal of the contemporary conservationists’. Ecotourism is an environmentally friendlier and potentially more sustainable alternative to extractive activities. For example, logging, farming, mining, or hunting of wildlife. Local people may have an opportunity being away from a cycle of poverty and, by sharing their information among local people and tourist about the local topography and ecology, which can helps to build up a stronger awareness of community pride and a wider, more global perspective that is aware of the importance of biodiversity to human being in the future.

Ecotourism provide a prospect for long-term protection of the environment and its resources. The hot spot of biological diversity is mostly the least developing country which is the economy of the country is particularly in drive people to destroy the natural environment. Ecotourism also provide an opportunity to protect the environment and biological diversity that almost extinct. Whereby, this is also chance to generate more income to hold research efforts. An eco-tourist attractions, the program registration fee can be further directed to the scientific knowledge about the ecological environment; support captivity, rehabilitation or reforestation; or man-made impact monitoring, to ensure that does not reduce access resources.

According to Sierra et al (op cit), to further verify the growth of global tourism, the relationship sandwiched between tourism and the environment is requires being clearly management to reduce the harmful and capitalize on valuable impacts. The appearance of ecotourism gives emphasis to the need for future professionals to develop suitable skills in tourism and ecological management.

2.3.2 Ecotourism in Malaysia

Malaysia is one of the countries from South-East Asia and it is well-known as a multicultural country. Multicultural has not only made the country as a food paradise, it has also made Malaysia place to holding hundred colorful festivals. Malaysia was also famous with the warm and friendly local people.

According to Smith, In Malaysia, tourism sector is currently the second-largest industry after the manufacturing was the largest industry in Malaysia. The government organization responsible on promoting tourism industry in Malaysia is Tourism Malaysia or also name as Malaysia Tourism Promotion Board.

Because of the geographical background, Malaysia is as miscellaneous as its culture. The country is separated into two parts, peninsula of Malaysia with eleven states and two states on the northern part of Borneo which is Sabah and Sarawak. The country is covers a total area of 329 758 km2 in South East Asia. The typical weather of the country is always warm and humid all through the year. Malaysia was listed as one of the most botanically diverse countries in the world. Malaysia is an amazing country with numerous abundance of biodiversity. The area of the country is granted with many natural destination and attraction such as flora, fauna and wildlife, beautiful coast, exotic marine aqua life, large rain forests and the biggest and oldest caves in the world. (Daud, 2010)

A unique natural and cultural asset diversification is what Malaysia really had. Therefore, eco-tourism in Malaysia was very favorable, feasible, sustainable and long-lasting form of tourism. In the year of 2008, Malaysia has won The Best Ecotourism award by TravelWeekly (Asia) during the Industry Award 2008 which’s held in Singapore. It is the second time that Malaysia was honored after 2007. It was an important accomplishment for Malaysia that proved itself for its natural environment as an attraction for tourism and unique geographical layout.

Malaysia was grouped as one of the twelve mega-biologically diverse countries in the world. Around the whole Malaysia, there have a minimum of 15,000 species of flora, 286 species of mammals, 4,000 species of marine aqua life, 150,000 species of invertebrates in addition to the numerous micro-organisms. There is 75% of land area in Malaysia remains forested and 60% of the area is virgin rainforest. The virgin rainforest is the habitat or home for the diverse group of flora and fauna and other living organism. The ecology scientists believed there may still be a number of other floras and faunas that have not been discovered living beneath its canopy.

There are beautiful oceans with several of marine aqua life that rely on the delicate balance of an unharmed environment surrounding Malaysia. From the other side of the world’s sea turtles make nests on the coast of Malaysia pilgrimage thousands of miles. Likewise, the visitors from all corners of the world visit our shores every year just to witness the magical underwater world. The a variety of activities such as jungle trekking, caving, hiking, river cruising, rock climbing, diving water rafting and bird watching was offered to the tourists by Malaysia. The Malaysia government concerned about the natural and cultural assets therefore, they have organized and create the event to let people more aware of the importance of preservation-based ecotourism. The examples of event consist of the Tabin Wildlife Conservation Conquest which located in Sabah, Fraser’s Hill International Bird Race in Pahang and Taman Negara Eco-Challenge competition in Pahang.

Malaysia’s been categorized as one of the top ecotourism destinations to visit in the world. The region is further growth by the enclosure of the Kinabalu Park in Sabah and Mulu National Park in Sarawak listed in UNESCO’s World Heritage sites list. UNESCO (United Nations Educational, Scientific and Cultural Organization) has also been recognized Langkawi Island or Pulau Lankawi which is situated in Kedah one of the northern states of the Peninsular Malaysia as a Geopark which mean a destination that contained outstanding geological landscapes in the world. Proudly, Langkawi Island is the one and only Geopark in the South East Asia and one of 50 among the whole world. In the meantime, there is two other destination which is Taman Negara National Park in Pahang, Batang Ai National Park in Sarawak and the Lanjak-Entimau Wildlife Sanctuary also been submitted by Malaysia Government as the nominations for UNESCO’s World Heritage Sites for future consideration .

The Malaysia Government was promoting the ecotourism of their country to worldwide; meanwhile they also create awareness to minimize the impact on the importance of sustainable development tourism and of balancing maintenance and development. The Ministry of Tourism Malaysia wants to provide the policies and guidelines for the reliable development of ecotourism. Therefore, they have officially taken on the National Ecotourism Plan (NEP) to ensure the policies and strategy for the conscientious development of ecotourism in the country itself.

2.3.3 Ecotourism in Penang

Penang or Pulau Pinang is one of the states in Malaysia with the covers a total area of 1,048 km2 (404.6 sq mi). It has been a long time that Penang described as Pearl of the Orient and is one of the most romantic and picturesque cities in all of Asia.

Penang was one of the top holiday destinations in Malaysia. The state was combination of an island and a narrow piece of land. The area of the island is 285km2 and it is separated from Seberang Prai (formerly Province Wellesley) – a hinterland of 737km2 on the mainland. It is connected by The Penang Bridge, which is listed as one of the longest bridge in Asia with the length of 13.5 km. Ferry service also available to connect the island and the mainland.

Georgetown is the capital of Penang. On July 2008, Georgetown was listed by United Nations Educational, Scientific and Cultural Organization (UNESCO) in the World Heritage List. The achievement of Penang was based on the certain sections of Penang has a large amount of pre-war buildings among the South East Asia country which are still undamaged. As a result, Penang Island is currently known as Penang Heritage City.

There are several of attractions around Penang, foods and shopping, from heritage to eco-tourism, and from beautiful beach to health tourism. In the year of 2009, Penang was ranked 22nd between the 44 top places to go of New York Times. Penang is one of the two destinations in Southeast Asia in this ranking.

Due to Penang having a tropical climate, it offers some ecotourism products in its state. The Botanical Gardens and the Tropical Spice Garden, both of the attractions were the ecotourism products of Penang. While the Penang’s National Park (Taman Negara Pulau Pinang) consist of a lot of eco attraction such as the immaculate Pantai Kerachut beach and also a beautiful lake which is the sea water and fresh water that do not mix up together. The park also provided the place for picnics, fishing, swimming and jungle trekking. Another ecotourism product in Penang is The Butterfly Farm which located at Batu Feringghi is a place where various types of colorful butterflies allocated in one destination and it is also a breeding research centre.

In Penang Island there is a Taman Negara Pulau Pinang (Penang’s National Park) at the northwest corner. The National Park covers the total area of 1,266 hectares of mangroves, coastal hill dipterocarps, beaches, and rocky shores. Among the Peninsular Malaysia, Penang’s National Park ranks second in size to Pahang National Park.

As a city national park, Penang National Park has probability to be listed in the UNESCO world heritage listing. It is because there was numerous species of flowering plants and animals- together with rare and endangered ones – it just takes around 45 minutes starting from the city centre, Georgetown. Meticulous planning and infrastructure will strengthen the park’s potential for ecotourism. Inside the park, there are only trails, footpaths, walkways and no roads. Penang National Park has created awareness for Penangites about the impacts of ecotourism and also the importance of sustainable development.

Penang was also famous with the beautiful and adventures beaches around the island. Batu Ferringhi is famous and it is one that can visit. In Batu Ferringhi and also Teluk Bahang, every part of these area are surrounding by the beaches and now the beach is getting cleaner compared with last few years where most of the tourist complaint about the cleanliness at the beach area. Along the coastline of Batu Ferringhi and Teluk Bahang, there was a lot of international resort available with the standard service and offering a host of water-based recreational sport facilities. Rasa Sayang Resort and Spa, Hard Rock Penang, Park Royal Hotel and Holiday Inn are the international resorts that available along the coastline.

Although there is quite a lot of ecotourism products in Penang but, the Chief Minister of Penang Lim Guan Eng has defended his suggestion to start a tiger park in Relau, This is because he wanted that the state to have a new ecotourism plan. The purpose of Penang Tiger Park is to become a new ecotourism product in Penang that can use to attract more international and domestic tourists to visit to Penang. (Looi, 2009)

2.4 Tiger Park in other Countries

Tiger Park was defined as a place to protect the endangered tiger as well as breeding herds of tigers. There are just a few of destinations categorized as Tiger Park in the whole world. Based on the research, there are only a few countries have Tiger Park existing as tourist destination which is Siberian Tiger Park, Harbin China, Tiger Kingdom Chiang Mai, Thailand and India which have the biggest amount of Tiger Park in the world.

2.4.1 Siberian Tiger Park

Siberian Tiger Park is the world’s largest Siberian tiger breeding base in Harbin, China. Once the human being spoiled the natural environment, many animals threatened with extinction, and a number of species have become extinct. The Siberian tiger is one of the endangered. It is the largest category of felid in the world and also known as the King of the Forest. Siberian Tiger was listed by the China Government as one of the first-class national protected animals of China other than panda in the year of 1980s. Siberian Tiger Park is built in the year of 1996 by the government to preserve this precious species.

The Siberian Tiger Park is situated at Songhua River which is located at the northwest of Harbin, with the total area of 1,440,000 square meters (355.8 acres). The Tiger Park has covered with 500 rare breed Siberian tigers, with 100 of the tiger are visible to visitors. Other than Siberian Tiger, lynx, black pumas, white tigers, lions, and leopards as well as Bengali tigers also can be seen inside the park.

The park was divided into ten different areas, which together with the young tiger area, the mature tiger area, and the king tiger area. There is also a walking area and a platform for visitor for tigers seeing. It is different compared to other common zoos, because the Siberian Tiger Park exchanges the roles of human being and animals.

According to Foxnews.com (2007), the number of Siberian tigers has kept on increasing at Siberian Tiger Park China. Which was good news because of Siberian tigers is one of the world’s rarest animals. In the other hand, there are also some serious cases happened in the park. Based on My Daily News.com (2011), a Siberian tiger killed a tour bus driver in the park. The tiger attacked the bus driver when he got out of bus to check on the bus that got stuck in the snow at Siberian Tiger Park which is a violated park safety rule. The tourists watched helplessly in horror. The management of the tiger park is expecting most of the bus drivers to understand the danger of the animals.

2.4.2 Tiger Kingdom Chiang Mai, Thailand

The Tiger Kingdom Chiang Mai (The Tiger Temple) or Wat Pha Luang Ta Bua is a Theravada Buddhist temple that located in Thailand. It has been a refuge for numerous of species of endangered animals especially tigers. The tigers were always walking around the temple once a day and the visitors can get really closer to see or maybe touch them. (http://www.hemmy.net/)

According to Alexander (2009), Abbot Pra Ajarn Phusit the monk teacher of the temple has been taking good care of the abandoned tigers and also the other animals in Kanchanaburi Temple which is the famous Tiger Temple since 1990s. Once he found the abandoned tiger cubs in the provinces nearby the forest, he will bring them back to the temple and provide a proper care for them.

Pra Ajarn is a very kind person and also an inspirational man who doesn’t mind been snapped pictures by the visitor’s cameras. Once the visitors have been visit to the temple, most of the visitor can feel the lovely relationship among the tigers and Pra Ajam. They are always staying close with each other. Pra Ajam won’t feel scare when facing the tigers. After year by year, the amount of tigers kept on increasing to 75 tigers living at the temple in the year of 2008. However, there was some critics to the temple because of the population growth of the tigers is a main problem, generally because the people commented the temple is employing tactics which are illegal.

In the year of 2008, Jachinthe Bouchar, the world renowned animal trainer had stopover to the tiger temple for her second time. She was staying there for two and a half weeks to trains the staffs and the monks about the techniques of training the Tigers. A planned new animal enclosure will be used for training clubs to take care themselves, and giving them the necessary skills to continue to exist in the wild.

2.5 Penang Tiger Park

Penang Tiger Park is a future plan as an ecotourism product in Penang which suggested by Lim Guan Eng, the Chief Minister of Penang.

P1–Describe the travel and tourism component industries and provide examples of domestic, inbound and outbound organisations within them.

Inbound Tourism: Tourists (non-residents) coming into a country e.g. The French coming into the UK.

Outbound Tourism: People leaving their country for another country e.g. Russians going over to China.

Domestic Tourism: Residents of one country travelling within it e.g. New Yorker travels to Los Angeles.

Accommodation:

It’s the place you stay at for your holiday or tour; accommodations can be both serviced and non-serviced, serviced is when the room or place you’re going to stay at is fully furnished and provided with cooking facilities, fresh meals, modern technology such as a flat screen TV and internet (Wi-Fi). For instance the Hilton hotels has its network in 78 countries across 6 continents[1]. The Hilton hotels are highly branded, stylish with excellent services, having over 92 years of experience proving their professionalism. Even the guest room itself has an original design which is well organised and undoubtedly accommodating. Thus inbound and outbound tourism would use serviced accommodation. On the other hand, non-serviced means only the accommodation itself is provided; the Sykes cottages organisation has over 5,000 cottages across the UK and Ireland. Nearly three decades of experience[2] indicates the company’s efficiency and credibility. Therefore non-serviced accommodation would be used for domestic tourism.

Transport Provision:

Irrespective of your destination, transport will be essential to get there; regardless of its form whether it’s by air, rail, road or sea. To get to and from your destination and around to explore the area coach or car travel is recommended. Coach travel are offering low cost prices if the tickets are booked in advance. Megabus offers prices as low as ?1. National Express is one of the largest coach companies that travel to more than 900 destinations across the UK[3]. Over the last 50 years, car travel has grown rapidly and it is by far the most popular type of transport used by the tourists in Britain. There are a variety of different worldwide companies, such as Avis that specialise in private car hire. Therefore both coach and car travel is suitable for domestic tourism. Rail travel is a more environmentally friendly mode of travelling. Virgin trains is a very popular train company that is popular with the tourists. Virgin trains have been around for over 15 years[4] therefore they are one of the most experienced train companies around Britain. Virgin trains travel all over the country. Thus rail travel being used for domestic tourism too.

When travelling by sea, it’s usually by ferries or cruising. Ferry companies operate services between the UK and Ireland, France, Belgium and a few other destinations. For example P&O Ferries, Irish Ferries and Stenaline. Since the Channel Tunnel was opened in 1994, ferry services have fallen dramatically[5]. However, cruising is also a type of travel using the sea and it is growing steadily and it is attracting lots off different types of tourists. In the past, cruising was seen more for the rich, famous and the elderly but cruising today, it is attracting families, young people and groups of people. Royal Caribbean Cruises is an example of a cruise service. This company holds the largest cruise ship ever built[6]. Sea travel would be used for all three types of tourism; inbound, outbound and domestic.

Air travel is the most popular type of travel used all over the world. This includes; scheduled–planes that operate to a published timetable. These planes have to follow routes and they are under government licence e.g. British Airways or the low-costs such as Ryanair. Tickets purchased from the company’s website, operating year round[7]. Charter–an airline ticket for a charter flight will be purchased from a tour operator. In this way, charter flights differ from scheduled flights, generally operate only during the summer months (May to October) or November to April for ski flights. Tour operators who put holiday packages together will charter or lease an aircraft from an airline such as Monarch or Thompson. Air travel is to be considered mostly for inbound and outbound tourism.

Ancillary Services:

Ancillary services are all the extras that come along side a holiday that tourists may need. These are things such as; travel insurance, foreign exchange, airport parking, car hire, luggage check-in, tour guiding, equipment hire, passport and visa services. Without Ancillary Services the holiday wouldn’t be complete. Many Travel Agents offer ancillaries to their clients and they make good commission on these products and services. Eurochange is the foreign exchange expert within the UK, which will allow tourists to exchange their currency with outstanding rates, one of the best foreign exchange companies in the UK such as The Money Shop. Therefore making their holiday alot cheaper; suits the inbound and outbound tourism.

Tour Operators:

A Mass Market tour operator are companies such as Thomas Cook and Thomson who deal with any type of holiday and they are able to arrange packages that suit the customers. A mass market tour operator also supplies their customers with accommodation, transfers, transport and extra services. Specialist operators are businesses such as Cox and Kings. These type of tour operators are a lot more personal to the customer. This is because these tour operators are able to cater and specialise to what the tourists interest are for example, someone wants to go on a cycling holiday, they can tell the operator what they want in their holiday and the operators can do their best to satisfy the customers’ needs.

Attractions:

The tourist boards have estimated that there are around 6,400 tourist attractions in the UK. In the travel and tourism sector, attractions are vital as they are what attracts all the tourists from around the world. The Lake District is one of the popular natural attractions in the UK[8], a natural attraction is an attraction that has been created by nature. Many of these areas have been given a status to protect their environment and provide facilities so that the public can enjoy the sights. There are attractions such as caves, waterfalls, seashores and any other scenic view interest that haven’t been created by mankind.

Attractions that are old and have been in place for many years and are now historical–heritage attractions. These are attractions such as canals, railways, battlefields. These attractions are in place so that people can gain an appreciation of the past. The Stone Henge is a popular hertiage attraction owned by English Heritage and is Located in Wiltshire.

Purpose-built attractions–attractions that have been built purposely to attract tourist into that area. When people hear the term ‘tourist attraction’ it makes people think automatically about the purpose-built attractions that are fun and enjoyable and designed for many different reasons. In the UK there are many purpose-built tourist attractions like Blackpool Pleasure Beach, Buckingham Palace and Alton Towers.

Events–attractions that attracts tourists to the area. These are small events like the Blackpool Illuminations or huge events like the Olympics and the Paralympics. Events play a significant part in the tourist attractions because in different parts of the country, some places can’t offer a large amount of natural or purpose-built attractions therefore the events may be the only reason people visit that certain area. Also Events bring in a lot of income which creates jobs and wealth in the area.

Tourism development and Promotion:

Tourist boards play an important role by helping destinations and co-ordinating the work of tourism businesses. Tourist boards get their money from the government (National and Local) and it is said to operate in the public sector. Public sector bodies play an important role in Travel and Tourism the UK, because they promote tourism and attract domestic and inbound tourists to the UK this in return will create income and jobs for local business and have a positive effect on the GDP.

Tourist boards are websites such as Visit Bolton, Visit England etc. These websites show people who are visiting that area what is happening during the period of time they are there and when and where the events and occasions are taking place. These websites give you information locally, nationally and regionally.

National–either a day trip of for a short break away. For example, the Visit Scotland website has information about the events that are taking place in Scotland and it also has their time and place that it is taking place. The national websites are usually available in a variety of different languages which means they are accessible for visitors from overseas who want to find out information about the UK.

Local–local destinations such as the Visit Bolton website. This website provides information such as train and bus times, events, accommodation around Bolton and also in Bolton there would be a Tourist Information Centre that would help out the tourists.

Finally, Regional–websites such as Visit England’s North West. This would be helpful for people who are overseas and they want to come and visit an area like the North West of England, it would give them information about what happens around this area and what type of activities and events are held in the Lake District.

Trade associations and Regulatory bodies:

A trade association is an organisation which works in the shared interests for either a particular industry or the customers in general; the difference between ATOL and ABTA is that they both exist for different kinds of operators. ATOL stands for Air Tour Operators Licence. ATOL is managed by the CAA (Civil Aviation Authority) and it is for the tour operators selling flights. ABTA stands for Association of British Travel Agents. ABTA is for the tour operators who aren’t involved with selling flights[9]. AITO is another association. This stands for Association of Independent Tour Operators. AITO was set up for the smaller travel companies[10]. These companies are in place just in case anything goes wrong whilst you are on holiday, all your money is protected. Also if any of the companies go bust whilst you are away, you will be refunded and brought home by the relevant organisation. If a tourist books a holiday through a company which is a member of AITO or bonded by ABTA they can be sure that the company is reliable and if the company should suffer from financial problems they will be protected. The traveller would be brought home from their holiday if the company failed whilst they were away.

Travel Agents:

Retail travel agent–advise people when they are travelling, about different hotels around the area they are travelling to and about the weather conditions and the different currency exchange. Business travel agent–travel services for companies, they focus mostly on short notice trips where the timing of the flight is alot more important than the price of the flight for the tourist. Call Centre travel agent–sells products over the phone and every day they have to reach a certain number of sales they make per day. Web Based travel agent–sells holidays over the internet. An example of these websites would be Expedia. This website allows you to create your own holiday trip and also looks at hotels and other extras that you might want with your holiday.

Types of business travel

Travelling on business can take many forms. Individuals may be travelling to meetings, to exhibitions to make sales calls to customers.

There are also a lot of occasions when high amount of groups of people travel individually, or together, to take part in a conference or corporate. Companies that organise business travel are operating in a different market to those who organise conferences and events and are often different companies. However, overlap does occur, for example Kuoni is a well known tour operator, yet has an arm of its company which specialises in event management.

Incentive Travel

The incentive travel is offered by the employer(company) to the employee which is like a entertainment gift for them as they are travelling for free. This will make the employee very happy as they can rest at the same time as well as having fun which overall it effects the work rate of the employee when they are back as it will make them much more motivated to work harder in the future as they may gain another reward.

What effect incentive travel gives to the employee

Facilitating communication and networking opportunities, especially in senior management
cheering the company’s socially
Having a better company loyalty
Creating eagerness for upcoming company period
Strengthening the relationship between the employee and the company

Advantages for employees

Every employee will feel very special and be satisfied in their job as the company has given them an fantastic opportunity to go for an great holiday which they have gain the award. It automatically changes the employees feelings in work by making them feel successful and thinking they are the best in that work place because they were rewarded an incentive travel. That may also mean they had one of the best performance in the sales team for that business because they were rewarded as not many people experience this trip because it’s not often many people being offered an incentive travel by their company.

Exhibitions and trade fairs

There are exhibitions and trade fairs for just about every type of product. Business people attend trade fairs to keep up-to-date on the latest development in their industry which shows they are competing with each other as the find suppliers for products and services and to network with colleagues.

There are two aspects of the organisation of fairs and exhibitions. Firstly, there are companies who organise the exhibitions and sell stands to exhibitors. An example is Reed Exhibitions. They have a division, Red Travel Exhibitions, who focus on travel events. Lastly, there are many of business to be gained in organising travel to exhibitions and accommodation for attendees.

Conferences and meetings

The meetings industry Association (MIA) is the largest association for meetings industry for the UK and Ireland, providing support for venues and suppliers in the meetings environment. A company who wants to organise a large meeting, or conference, could approach the MIA to find out about companies who can make the arrangements for them.

Corporate events

Corporate events and hospitality is a specialist industry within travel and tourism that focuses on providing events, hospitality and entertainment to business clients. It can be know as a an incentive to an consumer because they have place a business with a different employer or to persuade businesses that may have not yet customers to an arrangement with the business. It is also seen as a good way for a company to network and make new business contacts. Corporate events take many forms – from lavish events at Wimbledon or the Henley Regatta to the owner of a business inviting his or her bank manager for a meal in a local restaurant. Many corporate hospitality functions are centred on sports events, such as golf championships, cricket, tennis, rugby and football matches. There are many specialist companies that handle all the arrangements for corporate events, from sending our invitations and ‘meet and greet’ services to providing catering and entertainment.

Business Agencies

This section is the role of business travel agents and the different types of agents operating in the industry.

Role

Business travel is concerned with providing products and services for business people travelling to meetings, attending conferences and conventions, and taking part in trade fairs and exhibitions. It also includes incentive travel, where holidays, short breaks and other travel services are offered to members of staff as an incentive to reach work targets.

big business travel agencies are regularly performing on behalf of two parties when they take on their job. They are providing help needed by their customer, referred to as the consumer, on whose behalf they are making the travel schedules. They are also an agent for the corporation that is supplying the product. These companies are recognized as ‘principals’ and comprise airlines, hotels and car hire companies.

Business travel is an increasingly important industry, since it is often ‘high value tourism’, earning hoteliers, caterers, transport providers, travel agents and a host of other companies’ signii¬?cant income. Business travel is considered a high value industry because:

Clients often have to travel at short notice, meaning that they are not able to take advantage of discounted advance purchase rates;
Business people often use high quality accommodation;
Business travel invariably includes an element of entertaining business clients
Travel is often in upgraded services, e.g. business class or i¬?rst class.

Business travel agencies can be divided into i¬?ve distinct types:

1. Independent agencies

2. National agencies

3. Global agencies

4. Implant

5. E-agent.

Each type has its own particular characteristics and products.

Independent agencies

Across the UK, there are many independent travel agents that offer business travel arrangements. They are not part of a national chain and are often managed by the owner and a small team of staff. They may be companies that deal exclusively with business travellers, but are more likely to deal with both leisure and business clients. Unlike national agents (see below), independent travel agents are free to offer their business clients travel services from a wide range of suppliers. Independent business travel agents trade on their ability to offer their clients a very personal service, relying on word-of-mouth recommendation from satisfied customers for extra business. As well as being members of ABTA – The Travel Association, many independent business agents join consortia such as Advantage Travel or World choice in order to benefit from supplier discounts, make useful business contacts and to have their voices heard.

National Agencies

These are UK-based companies that are part of a national chain of travel agencies, such as Thomas Cook, Co-op Travelcare and Thomson. These agencies deal primarily with holidays and other leisure travel products, but can meet the needs of business travellers as well. Agencies that are located in parts of the country with high concentrations of companies and a large business community often generate a sizeable proportion of their turnover from business clients. Organisations of all sizes and in all sectors of the economy often need their staff to travel on business. Sole traders, members of partnerships, company directors, public sector staff, junior and senior managers, all travel from time to time on business. This could be in their local area, elsewhere in the UK, to countries in continental Europe or further afield.

Implants

Implants are agents operating within a business premises, so that they are on hand to look after travel requirements as needed. The agent may often work alone and is employed by a business travel agency, not by the company in whose premises they are based.

E-agents

As in leisure travel, there is an expanding demand for online business travel services. Some of them may be familiar with the website offering travel services, Expedia. Expedia claims that is corporate travel business, launched in 2002, is the fifth largest by turnover worldwide.

Products and services

Business travel agents may be dealing with small companies sending individuals on business trips to corporate clients who want all of their business travel managed.

Basic services will always include:

Accommodation bookings
Flight bookings – either scheduled or low-cost, business, first or even economy
Transfer
Cars hire or rail tickets
Ancillary sales, such as car parking or insurance.

The agency will book accommodation for a customer and that is to find where they will stay, arrange travel such as flight bookings on specific dates, transfers to the hotel etc. Ancillary services such as insurance and parking.

Management of a customer’s travel expenditures

This means analysing data so that a corporation knows exactly what is being spent on business travel and where. The travel management company manage the data and make it available to the customer 24-hours a day in a spreadsheet or database.

Negotiation with suppliers

The agent negotiates terms on the customer’s behalf with airlines, care hire companies and hotels for accommodation which this is for the agency to find the best deals for their consumers.

Products and services provided by suppliers

All hotels and airlines want to tap in to the lucrative business travel market and constantly bring out new products and services to entice business travellers.

Hotels offer Wi-Fi and business centres as a matter. Business customers may choose executive rooms. Even cheaper hotels, such as the premier Inn chain, offer wireless internet and meeting rooms which is what the business customers expects to have.

TUI is one of the leading tourism industry across the Europe started since 1997. TUI is the worlds leading travel group which operates in approximately 180 countries worldwide and provide more than 30 million consumers in over 27 base markets. The employees in the TUI travel group are approximately 65,000 and operate a pan-European airline consisting of 146 aircraft. The company mainly serves the leisure travel customer and is organised and managed through four business sectors which are Mainstream, Specialist & Emerging Markets, Activity and Accommodation & Destinations. In the financial year ended 30 September 2009 TUI Travel had revenues of ?13.9bn and an underlying profit before tax of ?366m.

They are providing their services of travel and entertainment to millions of customers in different regions and as well as in different well reputed hotels worldwide. It owns travel agencies, hotels, airlines, cruise ships, retail stores, and container ships. TUI is offering their services in different and easy way through range of high street outlets and online services and as well as different travel agencies for the convenience of their customers. Therefore TUI has become one of the European well known and reputed tourism industries.

Environmental analysis:

TUI environmental analysis can be possible by using different analytical tools such as PESTEL, SWOT and Porter’s five forces. TUI environmental changes can be analysed in both external and internal to investigate how TUI achieved and maintained their leadership in the European tourism industry. However ANSOFF matrix can be useful for the TUI future implication. Furthermore, to talk about the limitations of the analytical tools is part of the report as well.

P.E.S.T.E.L analysis:

TUI external environmental analysis is done by the PEST one of the analytical tools. The PEST is used to analyse Political, Environmental, Social and technological factors of the TUI industry.

Political Analysis:

It includes range of political issues in which terrorist attacks are the major issues which enables government to put restriction on in some regions and also some insurance denied to cover their insurance if travel to these regions. These attacks also results in tight security and immigrations laws which also highly affect the tourism industry. In addition political instability not only affect the tourism industry of particular country but also many other countries nearby.

Economical Analysis:

It analyzes different and wide range of economical issues such as exchange rate, globalisation, oil prices and recession which highly affect the tourism industries. According to Galleggo et al 2007 that exchange rate plays a key role in international business and this highly impact on tourism industries for instance the difference between Pound sterling and Euro exchange rates can affect the tourism from UK into different other European Union countries. The globalisation gives many chances and very useful for international business and particularly for tourism industries to enhance them through many travel agencies and hotels worldwide. (Munoz 2005).

As discussed by Wahab and Cooper 2001 that companies have low barrier for entry to market and take over other companies so then the threat to tourism from globalisation is the tough competition and maintain the quality of the services which they provide to the customers. Porter 1980 stated that when the barrier to entry is low the competition will tough for the company in new market. Aviation and oil prices also impact on the tourism industries. The recent economic disaster is one of the causes of falling down the tourism industry but on the other hand it is a chance for other well stabled companies in market to attract customers. Although, the last economic crises report could be expected and take into account that tourism contributes 10.6% of world GDP (refer case study).

Social analysis:

This factor totally belongs to the life style and behaviour of the customers towards buying a product. Therefore tourism agencies offer a modified holiday packages and online booking services for the convenience of the customers. In additions, consumers are very responsive to environment and are more attracted to those companies who are offering better environmental policies. Another social factor is the brand awareness among the customers and majority of the customer trust in the company’s brand name hence brand loyalty can be the result of past services provided by the company to consumers.

Technological analysis:

Technology and tourism are two of the most dynamic motivators of the emerging global economy. It quite clear from the Office for National statistics 2009 that majority of even household people relying on the internet and have got the access to it. That is the reason that online sales are growing day by day. As described by Porter 2001 that internet has a low barrier of entry and online sales make it easier for customers and companies to cut down their costs by reducing staff and other intermediaries but on other hand it has a threat for the companies because newcomer can easily come into the competition. Another major threat for the tourism industry is televisions which enable people to watch different tourist places live and avoid them from travelling.

Environmental analysis:

An increased emission of carbon CO2 is a big threat and aviations and tourism industries are one of the major contributors of these emissions. The UK government is using new methods to reduce the emission to help the environment. It is a corporate social responsibility of the tourism and aviations industries to maintain their environmental responsibilities. However UK government is arguing for greener holiday locations around because these emissions can cause of many health problems for which tourism industries should be concerned.

Legal:

Companies should be responsible of the legal issues and rules and regulations of other countries if they are going to join them because international trade laws play a vital role in the today’s business world. However, government suggested aviation safety and regulations which cover up different legal issues such as environmental, health, aviations permits and customers issues.

Local Resources:

Tourism industry also affects the local resources like food, water minerals and energy which can be already in shortage.

Water resources:

Tourism industry overuses the water resources which could cause water shortage and degradation of water supplies.

Pollution:

The pollution which can take place because of tourism industry are air emission, noise, solid waste and littering.

Porter’s five forces analysis:

Porter’s five forces industry analysis helps to measure and manage the long-term survival. Michael Porter (1979) provided a framework that shapes the industry as being prejudiced by five forces.

The aims of Porter’s Five Forces framework are

To understand the drivers of competitive behavior in the sector and

To evaluate the long-run profit potential of the sector

To highlight strategies to alter industry structure (Lynch 2000)

Potential entrants:

According to Porter (1987) there is a low threat of entrant to newcomers into market. However, companies already having high shares of the market make high barrier of entrant for the newcomers because more than 70 % of the market shares are taken by the existing leaders in the market. But still the chance for the newcomers is the brand recognition which can help them as a barrier of entrant into the market.

Substitutes:

The substitutes for the tourism industry are the television program and some sort of games which can affect the business of tourism industries but on the other hand the low differentiation of products reduces the risk of substitutes because there is still lack of entertainment as compared with travelling physically.

Competitive rivalry:

Due to the tough competition in the tourism industry the companies with the fixed cost are beneficial in the current circumstances because there is a clear difference in market shares between different companies for example the TUI with 21% and Thomas Cook with 13 % of shares in the market in present which alternatively reduces competition in the tourism industry.

Bargaining power of suppliers:

Companies with low shares have low power against suppliers. But where the companies have more than 50 % of the market shares have high power of negotiation with suppliers which will be power balance in a reasonable bargaining power for the suppliers.

Bargaining power of buyers:

The low differentiation of products and less number of substitutes in the market also reduce the bargaining power of buyer it is because of the changes in online cost sales and the use of internet.

Leadership maintenance in the European tourism industry:

Porter (2006) argued that an Organisation can only sustain their leadership if they set up some differences and keep its business attractive is the way to maintain their leadership.

TUI is one of the tourism industry leading companies with the current 21 % shares of the market and offers their services almost 180 regions internationally.

The internal analysis is carried out through SWOT analysis. It is used for review the general position of the business. Strength and Weakness are the internal factors, Opportunities and Threats are external factors. The strength of TUI helped them to maintain their leadership in the tourism industry. The value chain of TUI helped them to offer cheap prices to the consumer as compared to their competitors. The direct distribution channel plays a major role to boost up the revenue and helped them to cut down expenses of TUI travel group. TUI friendly shareholders and proper management and effective customer service helped them to retain their customers and attract new customers from the market. TUI travel group believed in their differentiated product and brand name attained the competitive advantage for the organisations. TUI always considered their shareholders and employees as the assets of the organisation.

According to Grant 1991 resources and capabilities are fundamentals of strategy direction and profitability. They maintained their capacity management resources to response to the changes happening in the business environment accordingly which helped them to achieve the competitive advantage over the competitors and boosted up the economical level. This high economical scale helped them to beat the rivals in the market. The acquisitions of companies, product differentiation and cost leadership strategies helped to gain a competitive edge. In the market TUI is the one to implement these strategies all together and gained the competitive edge from their rivals in the market.

Future implications of TUI:

The usage of analytical tools such as PESTEL, Porter’s five force, SWOT analysis, Ansoff matrix the macro and micro environmental analysis has been discussed in the previous sections of the report for the TUI travel organization. TUI implemented Ansoff matrix to lead the organisation on the progressive path although TUI is one of the leading tourism industry world wide and already counted in the top leader of the European market. As explained in the previous parts of the report depending on the key finding the future implications of TUI are as published in the Mintel report (2009) that the air flight was increased by short journeys just before the economic crises which benefited the low cost airlines but not for long because the recession has changed the whole scenario. Recessions has turned the consumers to low cost and cheaper alternative such as busses and rails even though these alternatives were more time consuming but because of the recession consumers preferred to have different experience of travelling however, these preference of consumers could be a chance for TUI to enhance their differentiation of products in the form of land transportations for short journeys rather than air flight to cope with the circumstances.

Internet gives an opportunity of low barrier entrant to the newcomers’. Hence, potential entry barrier requires a high investment to enter into the tourism industry. In this situations TUI need to focus on the online services to attract the low spending consumers.

International trade can be highly affected by the fuel price instability and particularly the tourism industry therefore TUI need to deal with the oil companies to overcome this issue for specific period of time but have to take into account that this could be threat until the oil companies stabilize the fuel price fluctuation. In addition TUI needs to focus on the environmental such as the carbon emission factors which could highly impact upon the tourism industry. However, it is clear from previous part of the report that consumers prefer the companies who are aware to the environmental changes therefore TUI need to focus on the environmental changes to overcome this issue.

In the planning for the future implication, TUI should focus on enhancement of their market in the Asia but need to maintain their European market as they already one of the leading tourism industry across European market.

Limitations of the analytical tools used:

The analytical tools I have used in my report to carry out analysis of TUI and its limitations are discussed below:

PESTEL analytical tool is used to analysis both macro and micro environmental changes of the industry and recognize the main issues which can affect the strategy and analyse the threats to the tourism industry, on the other hand there are few limitations of tools used to identify the weakness of tourism industry and shape them for a solution as a result.

The aims of the Porter’s five forces are to measure and manage the long-term survival and to understand the key drivers of competitive behavior in the sector and to evaluate the long run profit potential of the sector to highlight strategies to alter industry structure (Lynch 2000). Hence the limitations are that it does not think about the other products and also ignore most important aspects such as human resource, culture and management skills.

The use of Ansoff matrix is to analyze the corporate strategic growth of the organization and assesses the best position for the organizations but on contrary it only focus on the market shares and growth and does not consider the other significant factors.

The last analytical tool used in my report is the SWOT analysis which reviews the general position of the business. Strength and Weakness are the internal factors, Opportunities and Threats are external factors. It tells about the factor to be focused and helps in the better decision making circumstances. Although, it tells about the strengths of the organisations but no effective suggestions about how to use and be benefited the organisations from them.

Conclusion:

The report examines both macro and micro environment of TUI tourism industry by the help of some useful analytical tools to find out the key factors and as well as explore that how TUI gained the competitive advantage and maintained their leadership in the European tourism industry by identifying their strength and as well as illustrate the future direction to TUI for its growth and success.

However, the recession effect the TUI in both ways when we go for disposable income, it is very true that it had affected all the industry, but the other way round although the group profit of TUI for the financial year ending 2005 has decreased compare to 2004 but in comparison of over all tourism industry TUI did well as of its competitive prices and direct selling channel i.e. internet selling which obviously reduce the operating cost by less staff working. As disposable income have badly effected the TUI but still they need to reshape their marketing structure to attract the new customers. The management of TUI need to take decision to move the company as a profit making with customers satisfaction.

Refrences:

Annual Report. (2008). TUI Annual Report.

http://www.dft.gov.uk/.

eTourism: information technology for strategic tourism management by Dimitrios Buhalis Pearson Education, 2003 – Business & Economics – 376 pages

Gallego et al. (2007). On the impact of exchange rate regimes on tourism.As ociacion Espanola de Economia y Finanzas Internacionales , 1-16

Grant, R. (1991). The Resource-Based Theory of Competitive Advantage: Implications for Strategy Formation. California Management Review, 114-135

http://www.gdrc.org/uem/eco-tour/envi/one.html

Johnson et al. (2005). Exploring Corporate Strategy (7th Ed.). Essex: Pearson Education Limited.

Mintel Reports. (2009, July). Retrieved November 7, 2009, from MINTEL OXYGEN:

http://academic.mintel.com/sinatra/oxygen_academic//display/&id=39545

Munoz, J. (2005). Executive Insights on Globalization. International Journal of

Contemporary Hospitality Management , 17 (4), 365-371

Porter, M. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press , 33-61

Porter, M. E. (1980). How Competitive Forces Shape Strategy. The McKinsey Quarterly , 34-50.

Porter, M. E. (2001). Strategy and the Internet. Harvard Business Review , 63-79.

Porter, M. (1987). From Competitive Advantage to Corporate Strategy. Harvard Business Review , 43-59

http://www.statistics.gov.uk/CCI/nscl.asp?ID

http://www.statistics.gov.uk/cci/nugget

TUI case study

http://www.tui-group.com/en/company

http://www.tuitravelplc.com/tui/pages/aboutus/corporateprofile

Wahab, S., & Cooper, C. (2001). Tourism in the Age of Globalisation. London: Routledge

ELEFTHERIA GIAKOUMOGIANNAKI T230

Taking a country or region of your choice, calculate the net propensity to travel, the gross propensity to travel and the travel frequency.

Where do the people of this country or region travel to most?

Look at the patterns of demand for tourism and explain them in respect of social, technological, economic and political factors.

Germany is a country in Central Europe. The territory of Germany covers 357,021 square kilometers. Germany has a total population 82,438,000 and as the statistics says in 2010 it has the largest population among member states of the European Union. Germany is one of the main generators of international tourism at world level. The total German tourists are 57,111,000 and according to the Eurostat statistics handbook the percentage of the population who travel is 80.7%.

Net Propensity to Travel = Total number of people who travelled/ Total Population, so the net propensity of Germany is 80.7%.

The total holiday trips by resident tourists are 153,276,000. If we want to find the gross travel propensity we have to divide the total domestic abroad by the population. So, we have 153,276,000/82,438,000=185.9% ? gross travel propensity

To find the travel frequency we have to divide the gross travel propensity by the net propensity. So, 185.9%/80.7%=2.30 ?travel frequency, this shows how many times during the year they travel.

German people according to the Eurostat statistics handbook travel most to Spain, Italy and Austria and the percentage of these travels cover the 46.2% of the total holiday trips abroad.

Patterns of demand for tourism:
Social factors

The main social trends that have influenced partaking in tourism are the increase in flexible time, its altering allocation of that time and shifts in the way that society perceives this use of time. The structure that symbolizes this is the division of the day into equal portions of work, rest and leisure activity. As the working time has been reduced, people have more time for leisure activities in general and the changing distribution of this time is also important to tourism. One of the major changes was the introduction of the two-day weekend, which was involved in making stayover tourism achievable to nearby locations. Another major change was the standardization of the annual four-week holiday. The force for such reform came not only from the labor movement but also from corporations, which realized that the labor force required more unrestricted time to obtain and consume the goods and services that they were producing.

Technological factors

The technological development in aviation industry (the introduction of new long-haul aircrafts) plays a crucial role in the diffusion of tourism. Also the development of the car industry during the twentieth century paralleled aviation in its rapid technical development and growth. Information technologies have also played a vital role in the diffusion of tourism. For example, computerized reservation systems accelerate the proceedings of travel by providing travel agencies with flexibility, incorporation with other components of the industry and enhanced cost success.

Political factors

Tourism is dependent on the freedom of people to travel both internationally and domestically. Frequently limited for political and economic reasons in the previous growth stages, freedom of mobility is seldom an issue in Phase Four countries, where limitations are more often restricted to sensitive domestic military sites and certain forbidden countries.

Economical factors

Affluence is the most vital economic factor related with increased tourism demand. Usually, the allocation and volume of tourism increases as a society becomes more economically developed and greater flexible household income then becomes available. In the early stages of development process, regular tourism participation is possible for the elite, as demonstrated by the history of tourism in Europe. ”Burton’s” Phase One refers to these pre-industrial, mainly agricultural and subsistence-based situations where there no mass participation in tourism. In this Phase only the elite travel to domestic and international destinations. In Phase Two, the generation of affluence increases and spreads to a wider segment of the population as a result of industrialization and the rapid growth of urban areas. At the same time an ever-increasing number of newly reach individuals are visiting an increasing selection of foreign destinations. By Phase Three, the mass of population is relatively affluent and the middle class becoming dominant, leading to further increases in mass domestic travel as well as mass international tourism to nearby countries. The elite turn towards long-haul travel. Finally Phase Four represents a fully developed country with widespread affluence and a following pattern of mass international tourism to a varied selection of short and long-haul destinations. Almost all residents participate in a variety of domestic tourism experiences that differ greatly from those in the earlier phase societies.

References:

Eurostat statistic handbook

Tourism Management Fourth Edition-David Weaver, Laura Lawton

1

Trends for Tourism in Europe

The European Travel Commission (ETC) has revised its document ‘Megatrends of Tourism in Europe to the Year 2005 and Beyond’ on the basis of ongoing discussions with its members – the National Tourist Offices (NTOs) of Europe – and advice from the European Travel & Tourism Action Group (ETAG), whose members comprise international organisations representing the key tourism industry sectors.

Changes in society – new ways of travel

Society changes continuously, and trends – whether economic, social or lifestyle – subsequently impact on tourism, as tourism is an integral part of our society. It is important for the tourism sector to assess these changes at an early stage. Existing policies regarding products and services, marketing and investments, all demand appropriate adjustments or adaptations when preferences and behaviour develop differently from the way they have done in the past.

In the past, supply has always dictated demand, whereas today the reverse is true. Increasing saturation of the market and more self-assertive consumers, with more free disposable income and leisure time, determine the profitability of suppliers in the tourism sector. Competition is becoming more volatile. Although some trends are supply-funded, it is also important to forecast trends in demand, as these trends form the basis for determining the time and money required to make the relevant adjustments.

In this overview, we consider trends to be future developments that differ significantly from the past – both quantitatively or qualitatively. The main objective of this analysis is to support suppliers in their longer-term policy making. The trends mentioned relate to Western society – and to Europe in particular for the next five years. They are based on various quantitative and qualitative trend analyses and assessments made by leading international tourism experts.

Finally, analysing trends leads us to the conclusion that every trend creates a counter-trend. Furthermore, it should be stressed that, in many cases, trends are mixed: Mixed in terms of their phase of development, mixed in results and mixed in the level of importance. Given this fact, it is nearly impossible to isolate tourism development into single trends alone.

Trends

DEMOGRAPHY

The number of persons in older age categories will rapidly increase. Seniors will be healthier and will have higher disposable incomes than in the past. Many of them will enjoy early retirement schemes.

In view of this development, the number of more experienced senior travellers will increase faster than the development of tourism demand in general (although a gradual downgrading of pension benefits, and a trend to increase the pensionable age may slow down this development in the long run).

Consequences for the tourism sector:

Increasing demand for quality, convenience and security.

Increasing demand for easy transportation.

Increasing demand for more relaxing entertainment facilities (e.g. golf courses etc.).

Increasing demand for one -person products.

More demand in shoulder months.

In marketing, less emphasis should be put on age and more on comfort.

The average number of persons per household will decrease still further, which will result in higher disposable incomes and spending power. For tourism, this will influence demand in general, and demand for long-haul travel and short breaks in particular.

Consequences for the tourism sector:

Increasing demand for luxury (‘small indulgences’).

Increasing demand for special products which can be obtained on impulse.

Increasing demand for city -breaks and other short breaks abroad – in periods that used to be less favoured.

Higher level of interest in winter sun holidays.

HEALTH

Health-consciousness will increase still further.

Though increasing health-consciousness will not influence the volume of demand, it will certainly influence the decision-making with regard to destinations, and behaviour during holidays.

Consequences for the tourism sector:

Destinations that are perceived as less healthy will be more quickly avoided than in the past.

The demand for sun-holidays only will decrease still further.

Active or activity holidays will increase in popularity, and the demand for facilities that correspond to this type of holiday will be increasingly preferred.

The demand for ‘wellness’ products will increase, including spas and fitness centres.
< AWARENESS & EDUCATION

The average level of education is increasing.

This will res ult in holidaymaking in which the arts, culture and history play a more important role, including more educational and spiritual holidaymaking.

Consequences for the tourism sector:

Increasing demand for special products.

The more prominent inclusion of elements relating to the arts, culture and history in package tours and self-organised holidays.

The need for better and more creative communication of information.

Demand for new destinations in Central and Eastern Europe will increase.

LEISURE TIME

Modern society exerts increasing pressure on peoples’ daily lives, and stimulates the wish for more leisure time and relaxation – which will have an adverse effect on the increase of free disposable incomes. For tourism, this trend is thus by definition unfavourable – also because the increase in the number of days of paid leave for holidaymaking has come to a halt.

Consequences for the tourism sector:

An increasing need to supply additional low-cost products.

An increasing need to offer relaxation.

A shortening of the longer main holiday in favour of more short ones.

TRAVEL EXPERIENCE

More sophisticated consumers are increasingly self-assured regarding their needs and rights.

For tourism, this results in an increasingly critical attitude to quality, and to the price-quality ratio.

Consequences for the tourism sector:

Alternative ways of spending time and money will increasingly compete with holidaymaking, and within holidaymaking the preferences for destinations and accommodation.

Destinations that do not meet up to acceptable standards will suffer more intensely, and for a longer period of time in future.

More mixed behaviour: this holiday simple, the next one luxurious – this year longhaul, next year short -haul.

Holiday preference will become more fragmented in future, and thus influence repeat volumes.

Destination fidelity will continue to decrease over the years.

More experienced tourists will increasingly result in a more critical attitude to the artificial, in favour of greater authenticity – in particular with reference to emotional satisfaction and the need to personalise; artificial supply that does not distinguish itself from others (e.g. theme parks) will decrease in importance if it does not meet with higher standards.

Experience and critical attitudes will stimulate tourists to revisit satisfactory destinations from their travel past.

The increasing preference for mobility will stimulate rentals of cars, motors and bikes.

Regions that offer a full, varied, totally balanced concept will be increasingly preferred, and will demand better destination management.

LIFESTYLES

Lifestyles in Western society change gradually.

For tourism, this influences the tourist’s perception of his/her personal needs and behaviour.

Consequences for the tourism sector:

Though relevant investments may be made, the interest in ‘Bed & Breakfast’ is lessening, since it is regarded as cheap.

As ‘status’ is less important than it used to be, leisure behaviour is becoming more personalised, leading to increased demand for smaller sized accommodation units (like smaller authentic family hotels and tourist farms).

The shift in perception regarding life and lifestyle results in a decline in the demand for fully escorted tours.

Suppliers will benefit more if they are able to create completely new products, concepts and services that distinguish themselves by their added value.

Increasing specialisation by suppliers in relation to specific hobbies and interests will become more important, and will more often be combined with holidaymaking.

The increased preference for solid ‘anchors’ as secure holds in a more uncertain world stimulates the wish to possess second homes, also in areas close to smaller regional airports.

The trend of ‘back to basics’ results in preferences for more simple holidays: from hotel to bungalow, from caravan to tent.

INFORMATION TECHNOLOGY

The penetration of the internet – and its use for information and the purchasing of tourism products and services – will continue to increase. For tourism, the role of the internet – including new means of visual presentation – will increase still further, and will prove to be of the utmost importance in future.

Consequences for the tourism sector:

The ready availability of tourist information on destinations and products, and increasingly sophisticated search engines to analyse such information will lend itself to comparison, and thus influence competition more intensively via ‘grazing’.

Experienced tourists will increasingly put together their own holidays on a modular basis with direct bookings.

The role of travel agents will decrease, as full package tours are increasingly bought directly via the net.

Internet will transform the classical role of the National Tourism Organisations (NTOs) and Tourist Boards at an increasing speed – but will create a new role in e-marketing, including the application of Customer Relation Management (CRM) destination marketing.

Destination marketing (e.g. better branding with public support) will increase in importance as the source to stimulate website visits.

The availability of in-depth information on suppliers ‘ products, either on the destination site or accessible through links, will become of more importance as the basic precondition for the success of websites.

The possibility of ‘shopping’ via the inter net will stimulate later bookings.

The growing need for secure online reservations has to be stressed in relation to more experienced and self-assured tourists.

TRANSPORTATION

The increasing availability of high-speed trains and low-cost carriers will influence classical travel flows. Road traffic will face more congestion.

Consequences for the tourism sector:

Destinations will increasingly benefit from easy and affordable access for short breaks – in particular when major events are organised outside of the main season.

The increasing availability of direct links by train and plane will stimulate demand for international short breaks in cities and city regions, to the detriment of rural areas.

The use of high-speed trains for medium distances will take over a large proportion of the travel currently undertaken by scheduled airlines.

Road congestion will negatively influence transport by private car – in particular in the high season.

Coach trips will decrease in importance.

Barriers which result from non-adapted schedules or inter-modal transportation which is not optimally connected will have a stronger negative influence on destinations that cannot meet the growing wish for easy accessibility.

Cruises – not only expensive cruises, but also those in ‘budget -class’ – will increase in popularity, in particular for those over 50 years of age.

SUSTAINABILITY

Environmental consciousness will continue to increase. For tourism, this will result in more demand for sustainable destinations, in which nature and population will play an increasingly prominent role. In order to mitigate the costs for sustainability, the price will increasingly be passed on to the tourists themselves.

Consequences for the tourism sector:

The regional component in destinations will increase in importance.

Destination management policies need to be improved through more coherent and consistent planning.

The preference for destinations will be more strongly connected to the support given by the local population to welcoming increasing numbers of visitors.

Regions which have suffered from overbuilding (particularly where this is not in keeping with the natural landscape) will increasingly be rejected as attractive destinations.

Eco-tourism should not be confused with sustainable tourism.

SAFETY & SECURITY

Acts of terrorism, regional wars, pollution and other crises have unfortunately become facts of daily life, and influence the need to feel safe and secure. In tourism, this results in an increased need for safety and security, and in tourists avoiding destinations that are perceived as unsafe.

Consequences for the tourism sector:

The quality of water (in lakes and pools, but also of tap water) will increase in importance in the selection of the destination, and demands better protection.

The more critical tourist will more quickly make claims if the product offered does not meet up to the expected standards.

The costs for guaranteeing safety and security will rapidly increase.

4. The industry should be better prepared to meet tourism demand more flexibly in periods of crisis.