Over the years, the functions of tour manufacturers have diversified considerably. Obviously, the scope, pattern, structure and size of tour operation have increased manifold.
Today, tour operators are faced with intense international pressure in the form of competition and to cope with that they are to design and develop tour packages to meet the requirements of the ever demanding and sophisticated consumers.
Indeed, they must have a good grasp and knowledge of the tourist generating market and of the quality-price ratio of the packages they plan to introduce.
Many tour operators simply feel that they cannot design/plan tours because they do not have adequate knowledge, skills, expertise and enough ‘something’ to accomplish market requirements. However, if they approach it in a systematic, scientific and businesslike manner, can plan, design and operate tours both international and domestic.
Designing and developing tours, working with retail travel agencies, and vendors/ principal suppliers, formulating effective and extensive marketing plans, determining cost and price, operating and managing a tour, dealing with travel documents and legal formalities, handling the finance are the activities that are not easy to be handled rather involve commitment, determination, farsightedness on the one hand, and a great degree of risk, on the other.
Thus, the process of developing and planning a tour package and thereby satisfying the tourists can be conceived as a series of stages starting with market research and lasting with actual operation of a tour.
Stages of Developing and Planning a Tour Package
1. Research – Destination and Market:
The main object of tour packaging research is to analyse and understand the key elements associated with a particular tourist market and destination. Generally, many tour operators find that it is very difficult to arrange all things for all people.
Suppose, there is a person desiring to enter the tour field and accordingly will concentrate on identifying his areas of interest and specialization, therefore, the tour operator will research not only on the tours that seem to fit those areas of interest and specialization but, also on the potential market relating to those areas.
Some tour operators start with a tour product and then seek a market for it. Their tour product is the destination area consisting of tourist potential, touristic appeal, accommodation, and other services. Conceptually, a tour operator undertakes the following steps before entering the tourism market as such:
i. Identification of economic, political, social and climatic factors that influence the future development of package tours;
ii. The target market, when the target market is small the tour operator must obtain a large percentage to make a tour successful, but if the market is large he tries to capture smaller percentage;
iii. Making the tour to meet the exact needs of the target market;
iv. Identification of key destinations and a comparative study of alternative destinations;
v. Approaching the suppliers;
vi. Making the policy decisions.
Basically, the positive progressive approach to be adopted by tour operators is based upon researching both tour ingredients and the market i.e. the clientele, competition and tourist resources at the destination area.
Therefore, it is certainly not to suggest that one should not enter the tour market but rather to stress the importance of undertaking marketing research prior to investing amount and time on a tour that the study would have shown to be unprofitable or unpromising.
2. Tour Itinerary Development:
Once the study as regards the destination and the target market has been conducted, the second phase in the developmental process involves working out an effective tour itinerary.
It is based on two things – for new tour operators to research on both destination and tour ingredients and for established ones to review the questionnaires completed by previous tour participants.
Generally, the new tour operators undertake ‘familiarization tour’ and after successful operation, they develop an itinerary. The itinerary is a summarized tour programme, which is designed to identify the origin points, destinations, en route points, accommodation, transportation, sightseeing activities and other services.
Moreover, an itinerary shows the sequence of various tour ingredients and provides essential information such as assembling point, departure point, date of departure and duration of tour, legal requirements, features of destinations, optional activities, meal and perhaps more than these. Thus, itinerary development has become the crux and /or central point for the success a tour company.
Theoretically, there are two basic approaches for itinerary development. The first deals with approaching vendors without identifying himself. The reasons supporting this approach being that the tour planner makes reservations independently from the vendor companies as tourist or as tour planner to discover how the “average tourist” is treated by them.
It helps him to classify vendors into categories ranging from extremely good to extremely bad. That is, under this approach tour planner starts the ‘tour’ as a tourist who is not distinguished from the other tourists.
It provides a major advantage to the tour planner in the form of an opportunity to evaluate vendors and their services from the standpoint of general public (tourists). However, the approach has pitfalls of being both expensive and time consuming.
The second approach means a tour planner makes contract with all potential vendors in advance to put together all ingredients. When the ‘fam tour’ is conducted in this manner, the tour planner puts all possible components of tour together and develops final tour itinerary.
Obviously, tour planner receives much more than the average tourist would have received. Mostly vendors provide the tour planner more convenient and comfortable facilities during his visit.
However, this approach is not free from disadvantage of giving the planner a skewed viewpoint in respect of all ingredients of the tour. The tour operator industry practices show that the combined approach is most often used by tour planners to develop an itinerary.
The tour planner undertakes all possible attributes of the tour first as an unidentified individual traveller and repeats each tour ingredient as an identified tour planner. Thus, a tour planner will have a much more realistic view at the time of itinerary preparation.
More significantly, before designing and planning an itinerary, the tour planner must try to find the answer to three key questions – ‘How much customer demand is in the market?’; ‘How practical is the tour?’ and ‘How profitable is the tour?’.
3. Negotiations with Tourism Suppliers/Vendors:
Once the itinerary is finalized, the next step is to negotiate with prospective vendors. The tour planner works with many vendors depending upon the nature and size of the tour. The major ones are airlines, lodging companies, transport operators, car rentals, ground operators, sightseeing vendors and so forth.
A tour planner has an option to negotiate with air carrier directly or through a travel agency. If the tour company has a long history of operating large number of inclusive air tours, the tour planner will usually be better placed to negotiate a better price and better terms/conditions than the tour planner/company could obtain through travel agency.
On the other hand, if the company is new and normally operates railroad tours, the company will obtain a better price and margin, working through a travel agency than directly, because air carrier vendors generally provide/offer price reductions only to their best clients.
Travel agencies buy considerably more airline seats from airlines than tour operators especially, small scale. Practically, a tour company works on several air tours and purchases a substantial number of air carrier seats, the tour planner is in a position to meet with airline’s marketing executives and negotiate future tour group fares and ticketing.
But if he has to negotiate for reduced rate air tickets, the tour planner will be referred to the airline group desk. However, most airlines do not provide this type of negotiation.
Therefore, any tour company wishing to obtain ‘group’ rates must abide by all rules and conditions (formal) in order to qualify for such rates. Further, the negotiations concerning various services and concessions from carriers will depend upon how badly the airline needs to have the seats filled.
Hotel negotiations are generally more informal than in case of air carriers. Negotiations with lodging properties should be initiated on an appointment basis, meeting with top executives in each property if at all possible.
It is suggested that the negotiated arrangements agreed upon through discussions with property executives be detailed immediately after each meeting and the tour planner must strike a balance in obtaining quality accommodation at a price that is affordable for the target market being solicited for participation in the tour.
It is always better if the executive with whom the negotiation is undertaken agrees to sign a binding contract with a penalty clause included in case the hotel fails to provide stated services and facilities.
Further, a tour operator also negotiates with other vendors such as ground operators, restaurants, transport operators, sightseeing vendors, insurance companies, banking companies, cruise organizations and even others who are indirectly dealing with tourist services, which are the part of a tour package.
The ground operators tend to be umbrella companies that provide a variety of tourism services under one roof. Each of the vendors range in its degree of sophistication based primarily on factors relating to their size of activities and the number of tourists handled every year.
Moreover, the reliability and honesty of these vendors is an important issue which must be considered by the tour planner. Therefore, in selecting and negotiating these vendors, tour planner should be wary of potential problems that occur when finalizing the contracts. Once negotiations have been successfully agreed upon contracts (may be both national and international) are drawn up with these vendors.
Normally, having a letter of contracts, especially one that includes penalty clauses for non-performance or for performance to a lesser standard than that agreed to in the contract is one of the best ways of assuring that the vendor’s performance will be at least of expected standards. Thus, the main aim of negotiations is obviously to reach the best competitive price for a satisfactory quality-price ratio.
4. Costing of a Package Tour:
The concept of ‘tour cost’ is focal to understanding the connotation and practices of tour management in determining the monetary value of a tour package. In simple terms, ‘cost’ means the total expenses incurred to change the shape of individual ingredients into a tour package.
Since a tour company does not manufacture a tourism product (tour package) itself, rather it assembles or purchases individual ingredients/components from the various tourism vendors to form tour package. Therefore, the cost of a tour package can be determined as per clients/market requirements or organisational strategies,
As a general rule, the elements that make up the total cost of a tour package can be broken into various categories as, air travel cost, accommodation cost, local arrangement cost, payroll cost, research cost, marketing cost and other expenses.
Further, the cost sheet is designed to show the total cost/cost structure along with the break up of individual cost elements. It gives an idea how the profit margin is to be fixed.
Till today, there is no specific costing approach which is used in tour operator industry. However, as per the prevailing costing practices, one can visualize the following step-by-step procedure widely used in the tour operator industry.
The costing process involves several steps. Even though, these steps are not standard or generalized ones but can be changed/modified to meet the individual needs of the tour company.
However, it is suggested that, new tour operator must adopt step-by-step approach of costing a tour package. Because the cost is the basis for the determination of ‘right’ amount of profit and so is a biggest challenge for the tour planner.
5. Financial Evaluation and Pricing:
After costing of a package tour, tour planner determines exchange rates, estimates future selling prices and finalizes tour prices. The tour planner has to finalize price structure some ten months or more before the departure of a tour.
Therefore, apart from the usual hazards of determining the tour price in advance, tour operators must evaluate the financial risks such as foreign exchange, for payment of airlines, hotels, and other destination agencies.
The tour price is not solely determined in terms of the cost but also on the basis of expected goals such as Rate of return, Market share (both domestic and international) and Price competitiveness of the tour package.
Tour pricing is a very complex decision especially in view of the facts like the degree and intensity of linkages, the nature of tour ingredients, competitive tourism marl et, and problems involved in tourist demand.
Moreover, due to number of external and non- controllable factors – Government policies, climate, terrorism, inflation, competitive prices, market segments, exchange rate fluctuations and so forth.
Thereby as such no generalized tour pricing approach exists in the tour operator industry, and in actual practice, the approaches/methods adopted vary from one tour company to another.
James M. Poynter (1993) has developed a tour pricing formula and has described the various steps involved in it. As per the formula the tour price can be obtained by adding projected profit margin into the total tour cost.
Initially, the Tour Costing & Pricing Manager, determines the per pax break-even point tour price by dividing the break even number of tour participants and compares the calculated per person break-even point tour price (after adding the per person profit) to the budgeted projected per person tour price and modify accordingly.
To some extent this approach is useful for new tour planners or new tour packages but for established tour operators or existing tour products/services, this approach does not operate effectively as the tour planners are forced by competitive environment particularly suppliers and sophisticated clients to reduce their profit margins.
Holloway (1992) opines that specialist tour operators whose product is unique may have more flexibility here and may determine prices largely on the basis of cost plus mark-up whereas majority of tour operators take into account the prices of their competitors.
Most tour operators recover overheads by determining per capita contribution i.e. per pax break-even point based on anticipated costs for the year and anticipated number of tourists to be carried.
However, it has been noticed that in case of specialist tour operators, prices reflect market demand at different periods of the year and there is no equal distribution of overheads i.e. administrative costs.
Generally, administrative overheads are recovered in the peak season. In practice, the following tour pricing approaches are now being favoured for adoption by the tour operators.
i. Cost-oriented tour pricing
- Total cost/absorption cost;
- Product cost;
- Rate of Return.
ii. Market-oriented tour pricing
Poynter states that professional tour operators believe that a tour should not be operated unless it can be run profitably. It is important for the new tour operators to overcome the price obstacle on the very first tour so that the new comer will not be underpricing himself consistently.
Avoid running tours at below cost, making do with inferior quality and giving yourself too little remuneration and avoid unrealistic overpricing fears. Thus, tour operators must constantly keep in mind that with every rupee increase in the price of their tour, a percentage of potential tourists may be excluded from the tour market.
6. Administrative Staff:
Since the tour operation business is seasonal in nature, it requires extra personnel to meet the increasing needs. Tour operators are usually clear about what they want while selecting administrative staff to perform the extra activities, may be at a particular destination or at a resort.
Tour operators recruit persons with friendly and sociable personalities, organizational skills, good humour, a sense of ethics, the ability to make decisions and a love for people, places and travel.
Tour managers see themselves in much the same way, but they also consider it important to oversee the whole tour, deal with problems, guide tour members in the culture and language, and generate business.
Generally, the same staff come and works for the same operator every year, which reduces the need for training. Many tour operators recruit mostly reservation staff, guides, resort staff, sales representatives, international agents, and so forth on a part-time basis or at the most for a season.
7. Marketing of a Tour Package:
The tour operators strategic position between the various vendors encompassing airlines, transport operators, hotels, etc. and the ability to combine the various elements of travel industry into relatively affordable and standardized tour package, have emerged as the key manipulators of tourism industry.
They play a pivotal role in determining tourist flows to a particular destination, in both developed and developing nations. As Shaw and William (1994) point out that approximately 80 percent of travel from the UK to Greece is in the form of package tours.
Thus, in United States, India, and most Western European countries there are now thousands of tour operating companies which are designing and marketing tour packages in the international tourism market.
When tourists choose to book a package or decide to go on holiday, how do they determine which package to buy especially in view of the consumer’s inability to inspect the ingredients making up the tour package prior to travel?
It is the tour ‘marketing’ which applies much more sophisticated strategies of trying to know what the tourist will want and satisfying the needs of the clients by means of the services rendered as well as the other customer’s value satisfactions associated with planning, preparing, and experiencing his travels.
Kotler (1988) defines marketing as ‘a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and values with other’.
The American Marketing Association (1984) defines marketing as “the performance of business activities that direct the flow of goods and services from producer to the consumer or users”.
In simple words, marketing is the creation of a demand that results in satisfying consumers and accomplishing corporate objectives. Thus, the most important aspect that should be central to any marketing definition is based not only on identifying different consumer needs, but also on delivering a tourist product/service whose experiences provide sets of satisfactions which are preferable to those of the competitors.
Tour package marketing is significantly different from the marketing of other tourism elements. This is because of the nature and types of tour packages offered by tour operators.
Moreover, in the tour industry the marketing strategies that are effective and profitable for the mass tour operators, will often be substantially different than the marketing strategies adopted by tour specialists.
For example marketing strategies of adventure tour operators will be different from strategies used by ground operators/or inbound tour operators. Even the marketing strategies of multiple tours involving multi-destinations will usually be different from the one day/one destination tours.
Thus, it has become imperative for a tour operator (if wants to be effective in marketing) to analyse profoundly what has been beneficial or productive for other tour companies in the same tour/similar destinations. Marketing of inclusive tours is largely the responsibility of the tour operators.
Radburn and Goodall (1990) rightly stifle that it is vital to the tour operator that marketing creates the image necessary to achieve volume sales, which is encouraged at least in part by each tour operator offering a range of tour packages with a high degree of substitutability. It would, therefore, seem sensible that tour operator must adopt a structured and systematic tour marketing plan.
8. Developing a Tour Marketing Plan:
Tour marketing plan is centred on organizational objectives. It is important to have a clear understanding of what the tour operator desires to achieve through marketing plan.
In fact, a tour company needs to understand both its product and its market before developing a marketing plan. For many tour companies, budget is the first step in the process of developing a tour marketing plan.
It is normally based on a certain percentage of projected expenditures for the next year. However, the proportion varies from package to package or existing tour company to new tour company.
For new tour companies and specialized tour operators a higher budget will be required. It may range from 25 to 30 percent of the total projected cost.
The tour marketing plan is normally a short term plan which guides the tour operator for one to three years. It provides a clear direction of the tour marketing operation based upon a systematic approach to planning and action.
It also coordinates the resources of the tour company to achieve the set targets. Recognizing the importance of tour marketing, tour operator develops the required mechanism to build effective tour marketing strategies.
It illustrates how the tour marketing planning process should function and ensure that marketing activities match the resources, time requirements and objectives of the tour company.
To decide on the tour marketing strategies is perhaps the most complicated stage in the planning process. The working out of an appropriate strategy is directly related to the nature and type of the tour i.e., which strategy is most befitting for inbound tours, outbound tours, or incentive tours is based on its ability to provide a substantial return on investment.
For example, tour operators, in case of outbound tours generally target travel agencies through a combination of strategies. Large scale tour operators add a few new strategies, each year to maximize their return.
Some strategies are used for only a specific season/ destination while some strategies will be undertaken on a regular basis and reviewed or monitored periodically or at regular intervals of time.
After identifying marketing strategies, tour operator develops annual media plan, advertising plan, sales plan, direct mail plan, and telemarketing plan. Practically, tour operator develops marketing plans in a number of ways namely, annual marketing plan i.e. blueprint for the whole year and individual tour marketing plan.
It is of utmost significance that all marketing plan components need to be coordinated in a manner that they fit together easily and effectively and, consequently can be implemented economically.
9. Marketing Inbound and Outbound Tours:
Generally, the international tour marketing is relatively more complex and difficult than domestic tour marketing. International tour market is composed mainly of tours organized and planned in another country and operated in other countries.
Although the tour components in different types of tours are different but the tour marketing is similar to much extent. As an inbound tour operator handles these tours in different countries/destinations.
For example, the India based tour operator handling international inbound tours will be expected to provide full tour services that are included in the package in the similar way as US, UK and French tour operators do, but the components may be different.
Interestingly, obtaining contracts to handle inbound tours is quite different from handling outbound tours. For outbound tours, the tour operator usually is required to approach each and every tour member to sell its product (package), directly or through travel agencies.
In many cases a tour operator undertakes substantial contracting with inbound tour operators or ground operators to provide services as prescribed in the tour programme.
However, for marketing inbound tours, a tour operator procures lists of those tour companies and travel agencies which are interested in travel business from the destinations served by the inbound tour operators.
This is generally achieved through participation in international meets, marts, conferences and other associations. Practically, these events are so planned that international tour companies and travel agencies may purchase from the different country based inbound tour operators those travel ingredients required in order to operate their tours during the coming years.
Thus, it is clear that tour operator will either offer his tours directly to the market or sell them through travel agencies. Whichever method of distribution he chooses, sales will hinge on products being presented in brochures designed by the tour operators and marketing techniques as well as promotional campaigns being applied.
10. Tour Operator’s Brochures:
The tour operator’s vital marketing tool is its tour brochure which contains comprehensive information to persuade and motivate potential holiday makers to purchase tourist products/services.
Middleton (1988) demonstrates that tour marketing relies on brochures to a much greater extent than other forms of consumer marketing.
It presents the product ‘stock’ at the retail level but, at the time of sale, the total tourism product is no more than an idea – the brochure establishes expectation of quality, value for money, product image and status. Holloway (1992) lists the information that should be included in a tour operator’s brochure.
- Name of tour company responsible for tour;
- Transport mode(s) – carrier name, aircraft type and use of scheduled or charter services;
- Details of destinations, itinerary and travel time;
- Duration of tour – nights and days;
- Description of destinations;
- Type of accommodation and meals;
- Services of ground operators;
- Extra charges clearly indicated;
- Details of special arrangements and facilities;
- Full booking conditions including cancellation terms;
- Any optional or compulsory insurance cover;
- Documentation required for travel to the destinations featured; and
- Any health hazards or inoculation recommended.
Thus, the tour brochure consists of several sections and sub-sections. The brochure cover shows the title, date, theme, tour code, and name of the tour company.
The inside pages/flaps highlight the tour features, a brief itinerary, modes of transportation, types of accommodation, payments, unique appeal of destination(s), payment conditions, insurance, currency, documents, internet address, website(s) and also contains a self-mail flag/page on which potential tourists may fill in tour registration information in order to sign up for the tour.
The large tour companies, especially in UK, US, India, Germany, Japan, and France print over one thousand copies of their tour brochures and distributes through retail travel agencies/ground operators, and their own retail outlets.
Sometimes the brochures are sent directly to the past clients and others who have been identified by market research, particularly corporate houses. However, tour operators must make an appropriate decision in this context, because about half of all tour brochures are eventually thrown away without being seen by the public/ corporate houses.
Therefore, wastage can be controlled or minimized by establishing accurate standards/norms. Thus, it is suggested that before distribution of tour brochures, sales managers must categorise their agents and clients. Definitely, it will prove instrumental in cutting down waste as well as costs.
In addition to tour brochures, tour operators often undertake various promotional programmes to market tour packages such as personal selling, sales promotion and advertising campaigns.
Tour promotion is the blend of communication activities designed and carried out to influence those clientele size on whom the tour operator’s sales depend both in the short term and long-term.
It is not sufficient to influence target markets only but also travel agents, suppliers, travel writers and journalists, destination companies, and Governments. Basically, the tour promotion is substantially different than other travel products/services because of variety of specialization in tour operation industry.
Therefore, a tour company must define marketing/promotion objectives very clearly to design and practice most effective promotional tools/techniques.
In actual practice, tour companies employ the following promotional techniques to create awareness and building brand image of tour packages:
- Direct Mail;
- Sales Promotion;
- Public Relations;
- Personal Selling;
- Travel Marts;
- Films and Video;
- Familiarization Tours;
- Conferences and Debates etc.
Paradoxically, the promotion of tour package relies on effective communication of tour ingredients. Tour package is an amalgam of various products/services which can really be experienced only at the moment of their consumption and which cannot be systematically reproduced in an identical way.
Therefore, in an increasingly competitive tourism market, it is often the access to information which ensures the success of tour marketing. For tour operators, it is extremely important to participate in Computerized Reservation Networks and in Global Distribution Systems.
Today, tour companies have access to information on all air carriers, hotels and related products/services and can distribute their packages through a global distribution system network.
GDS terminals provide immediate access to all the suppliers which have opted to market their products through this network. GDS has, therefore, become extremely significant in the sale of air and other tour packages.
Unfortunately, GDS has not been put to use by many tour operators especially small scale/ground operators and domestic operators because of being poorly equipped. They are still using the traditional methods.
Many tour companies have designed effective tour reservations system to put a tour package into operation. Generally, tour operators have employed several methods to handle tour reservations.
New and small tour operators tend to work with answering services and usually consider direct reservation from public through telephone, and through agency’s computer reservation system.
While large scale tour operators have their own reservation network. They obtain more than 75 percent of their business through intermediaries and the balance directly i.e. through CRSs.
This provides substantially better quality reservations, greater data flexibility and faster data input. Today, the most of the tour operators have computer reservation systems tailor designed to meet their specific needs.
Although these are expensive but they can provide the company with a highest degree of capability. It may seem to be illogical but is true that tour operators are even now using same resources they have always relied on:
Printed brochures and personal sales visits. In fact, according to recently released HSMAI Survey of Tour Operation Industry (North American segment), 1999, industry professionals are relying on tour brochures (75%), trade directories (68%), trade periodicals (60%), direct mail and so forth.
11. Operation and Execution of a Tour:
The success of a tour operator depends on how efficiently it operates a tour. This phase is very crucial and has capacity to convert promises into realities. So utmost care has to be taken to realize whatever had been promised in the package tour to offer to tourists.
An experienced tour operator develops tour manual for tour manager, tour escort, tour guide, Destination Company and for other services to provide an understanding of how the tour company wants to operate and handle tour.
A tour manual provides procedures and polices to conduct tours in more professional manner and the way in which procedures should be implemented as the tour progresses from beginning to end.
Practically, a tour manual includes several sections relating to carrying out day-to-day responsibilities, policies, guidelines for working with vendors and tour participants and emergency handlings.
It helps to establish a standard and a reputation for the tour company while giving guidelines to tour managers for answering questions on location/destination. It means that a problem can be resolved right away rather than waiting until direction can be received from headquarters.
The tour industry practices have shown that if everything is managed professionally then it is not only one of the most effective but the only effective and productive system of operating and executing tours. Incidentally, most of tour companies are lacking in this professional approach to operate tours.
12. Post Tour Management:
This phase is relatively more crucial, which involves preparation of several reports and their evaluation. In fact, it reveals the success of the tour, where tour planner should go for comparative analysis of the perceived goals, actual achievement and assessing the tourist satisfaction level, the financial gains, and the effectiveness of the tour packages.
Many tour companies have a policy to obtain tour manager’s perceptions regarding what tour participants (members) liked the most about the trip and what they disliked. Detailed vendor reports are often required to evaluate the services rendered and products provided by these vendors.
These reports are evaluated and reviewed to identify real or potential problems. Generally, tour company decrees that if there were vendor problems which were serious enough to consider making a change, tour manager should expedite the reports so that tour planner may add the right ingredients in the next tour package.
Tour member’s tour evaluations regarding the ingredients and services mostly serve two purposes. Firstly, to determine the feelings of tourists regarding the tour and its ingredients.
Secondly, to remind tour members of how enjoyable the tour was and motivate them to sign up for future tours. Thus, tour member’s tour evaluation report must include both general and specific questions.
Normally, each evaluation response is statistically analysed to calculate a mean average in determining an overall tour members opinion. Other statistical tools may, however, be used to obtain more accurate results. These findings give an idea of how the next tour is to be planned, designed and marketed.