Tour Operations Management

1
Tour Operations Management

• The Economics of Tour Operating
• The Planning Cycle

2
Pricing an Inclusive holidaySee Yale (1995) The
Business of Tour Operating

• What needs to be included in the costing?

3
The Economics of Tour Operating

• Negotiating bulk rates
• Yield Management
• High Utilisation
• Contingencies
• exchange rate and fuel price fluctuations
• Cash-flow management
• Secondary spend

4
The virtuous circle of tour operating
Thomson Holidays in Morgan 1996
5
Negotiating issues

• How are the rooms contracted
• dTime Block, Sale or return, free-sale?
• Deposits or pre-payment
• Release dates
• Regularity - closed-out dates?
• Exclusivity?
• Facilities

6
Yield management

• Aim to maximise overall revenue by balancing
  supply and demand (Middleton)
• Differentiated prices acc to season, time, and
  customer segment
• Discounting to stimulate new demand without
  reducing yield from existing customers
• Danger - creating expectations of bargains?
• - effect on perceptions of value?

7
High utilisation results from

• Good yield management
• operational efficiency
• back to back flight schedules
• quick turn-round times
• consolidation
• moving customers and cancelling flights/rooms
• Conflict between utilisation and quality of
  service? Ethical issues?

8
The vicious circle of tour operating
Morgan in ETUP 2001
9
Cash-flow management

• Aim to balance receipts and payments to minimise
  the need for borrowing
• incentives for early booking
• interest on deposits
• year-round programmes
• timing of payments to principles
• see Middleton 1994, Yale 1995

10
Secondary sources of revenue

• Add-on products
• commission
• merchandise
• cancellation charges
• foreign exchange dealings
• advertising

11
The Tour Planning Processbased on Holloway
(1994) , Laws (1997)
Research
Select Resort Hotels
Negotiation
Agree rates capacity with hotels and flights
Administration
Marketing
Set prices, design brochures, set up CRS
Operation
Brochure launch, advertising, agency support
Review sales, tactical pricing
Tours start, Monitor CSQs
Yr 2
Yr 1
Yr 3
Spring/summer
Summer
Winter/spring
Autumn
Winter/spring Summer
12
Does the package holiday have to be a low-profit
margin business?