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Travel and tourism intermediaries

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Presentation on theme: "Travel and tourism intermediaries"— Presentation transcript:

1 Travel and tourism intermediaries

2 Introduction Intermediaries in travel and tourism link those who offer services (service providers) with those who make use of these services (travelers and tourists). The main representatives of travel and tourism intermediaries are travel agents and tour operators.

3 One of the most noticeable differences between tour operators and travel agencies is that tour operators operate as wholesalers, and travel agencies as retailers. Therefore, travel agencies do not face the risk of unsold capacities, because they do not purchase in advance the services from suppliers, but sell their services only when they have a buyer for them.

4 The terms ‘tour operator’ (widely used in Europe) and ‘wholesaler’ (mostly used in the United States) A wholesaler can be any bulk buyer and seller of a single travel and tourism service.

5 Economics of travel agencies
Retail travel agencies in the majority of cases are small businesses. However, it should be pointed out that the distribution network worldwide differs from country to country. It can range from very small enterprises, often family owned, to large multinational companies. According to the research of the world’s largest association of travel professionals, ASTA (American Society of Travel Agents).

6 The number of small agencies has been decreasing, while the number of medium and large agencies has been increasing since 1998. The main reason lies in the fact that agencies in a franchise or in cooperation are better able to secure an over- ride commission with carriers. In this way, travel agencies can secure up to 5 per cent additional commission. In this low net-profit business this is of enormous significance, since such commissions can increase a travel agent’s profit by up to 50 per cent .

7 There is a difference in the structure of sales items between Europe and the USA. The main sales items among European travel agencies are package tours which account for more than 50 per cent of total agency sales, followed by air tickets which account for over one-third of an agency’s sales. However, the sales items ratio in Europe is quite different from that on the US market .

8 Some problems : Small travel agencies in Europe usually do not sell airline tickets because they would need to obtain an IATA (International Air Transport Association) license which would entail additional costs. In the USA there are ARC-accredited (Airlines Reporting Corporation) and non-ARC sellers of travel services. ARC retailers are also usually members of IATA and are allowed to sell both international and domestic airline tickets. Air sales generally represent over 50 per cent of total agency sales in the USA. The whole tourism business is very much characterized by seasonality, travel agencies are also confronted with the consequences of this problem, which means that their money inflow and outflow is the reflection of seasonality and can have very high fluctuations.

9 Tour operator economics:
Principles of tour operating and the main commercial risks. As already mentioned, tour operators appeared on the tourism market as entrepreneurs in the sphere of organizing leisure travel. The main risks in the tour operating business are connected with projections of tourism demand, capacity planning and pricing. Tour operator economics:

10 The lower the price of a package holiday which the tour operator can achieve in comparison with individually organ- is travel allows the tour operator greater opportunities in finding clients on the market to whom it will be able to sell the programme and, at the same time, lower the risk of contracting large capacities. The level of risk greatly depends on the contracts signed, since the terms and conditions between tour operators and service providers specify commitments.

11 Example : In the case of hotel contracts, there are two possible types of contracts: an allotment and a firm contract or a guarantee. A contract of allotment allows a tour operator to return an unsold allocation of rooms to the hotelier within agreed release dates at no charge or penalty. The contract is usually signed for one season. In the case of a firm contract or guarantee, hotel rooms may not be returned, and tour operators have to pay for the whole contracted capacity no matter whether they are sold or not. Such firm contracts are frequently signed for a longer period (three to five years). In this case, tour operators can secure the best possible prices, but at the highest risk.

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