Republic of the Philippines

NUEVA ECIJA UNIVERSITY OF SCIENCE AND TECHNOLOGY

Cabanatuan City, Nueva Ecija, Philippines

SUBJECT INSTRUCTOR:

ANNA MARGARITA T. DE LEON

Developed for educational purposes only

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TABLE OF CONTENTS

PRE-TEST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
UNIT I - INTRODUCTION TO TRAVEL AND TOURISM BUSINESS. . . . . . . . . . . . . . . . 6
– Evolution of Travel Business
– Meaning and concept of travel business
– Difference between travel agency and tour operator
– Types and organization structure of TA and TO
– Types of Tourism
UNIT I – ACTIVITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
UNIT II - MOTIVATION FOR TRAVEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
– Basic travel motivations
– Sociology of tourism
– Promoting social tourism
– Social significance of travel
– Evolution of demand
– Factors affecting Tourist behavior
– Factors influencing the growth of tourism
UNIT II – ACTIVITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
UNIT III – DESTINATION MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
– Role of DMO
– Objectives of DMO
– Characteristics of DMO
– Tools for destination management
UNIT III – ACTIVITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
UNIT IV – THE PHILIPPINE TOURISM INDUSTRY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
– Role and Responsibility of DOT
– Duties and responsibilities of tourism in the Philippines
– Understand the different government agencies and tourism organizations
UNIT IV – ACTIVITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
UNIT V – TRAVEL AGENCIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
– Role, Functions and Responsibilities of TA & TO
– Ticketing- Fare Calculation- Documentation- Packaging Tour
– Foreign Exchange
– Travel Documentations
– Know the current trends in online and retail operations of travel business
– Role and importance of travel agency
UNIT V – ACTIVITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
UNIT VI – TOUR PACKAGING AND PROGRAMMING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
– Meaning and Classifications of Tour Packages
– Components of Package

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 – Advantages and disadvantages
– Customized and Tailor-Made Package
– Tour Formulation & Designing Process
– Tour Brochure Designing
UNIT VI – ACTIVITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
UNIT VII – PACKAGE TOUR COSTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
– Meaning and Types of Cost
– Concept of Tour Costing
– Components of Tour Cost
– Pricing Package Tour
– Pricing Strategies
UNIT VII – ACTIVITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
UNIT VIII – TOURISM IMPACTS, TRENDS, AND FUTURE. . . . . . . . . . . . . . . . . . . . . . . . . 68
– Economic impacts of tourism
– Environmental impacts of tourism
– Social impacts of tourism
– Digital technology and new trends in tourism
– Future of tourism
UNIT VIII – ACTIVITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

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PRE-TEST.
Encircle the letter of the correct answer.

1. Involves the activities of people travelling and staying in a place away from their
home environment for leisure, business or other purposes.
a. TOURISM b. TOURISM MANAGEMENT

2. It involves the management of multitude of activities such as studying tour

destination, planning the tour, making travel arrangements and providing
accommodation. It also involves marketing efforts to attract tourists to travel to
particular destinations.
a. TOURISM b. TOURISM MANAGEMENT

3. He set up the ‘World’s First Travel Agency’. Known as the Father of the Travel Agency
Business.
a. THOMAS COOK b. CONRAD HILTON

4. Packages and processes all the attractions, accesses, amenities and ancillary services
of a country and presents them to the tourists.
a. TOUR OPERATOR b. TRAVEL AGENCY

5. An organization, firm or company which buys individual travel components,

separately from their suppliers and combines them into a package tour, which is sold
with their own price tag to the public directly or through middlemen.
a. TOUR OPERATOR b. TRAVEL AGENCY

6. It refers to that type of destination where tourists need to travel and explore
surrounding region.
a. BASE DESTINATION b. CENTERED DESTINATION

7. Need to realize one’s full potential. A human being requires to attain this need after
all the above needs are satisfied.
a. SELF ACTUALIZATION b. PHYSIOLOGICAL NEEDS

8. They give very little importance to relaxation. They are always up to exploring places
and taking challenges. Mainly youths and singles from both genders carrying zest of
life largely contribute to this type of tourism.
a. ADVENTURERS b. HOMEBODIES

9. A tourist who seeks new experiences and adventure in a wide range of activities. This
person is outgoing and self-confident in behavior.
a. PSYCHOCENTRIC b. ALLOCENTRIC

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10. A tourist falling in this category is usually non-adventuresome. They prefer to return
to familiar travel destinations where they can relax and know what types of food and
activity to expect.
a. PSYCHOCENTRIC b. ALLOCENTRIC

11. They do not have much money as well as knowledge. They prefer packaged tours.
They long to observe different cultures without being a part of it. They travel mostly
out of curiosity.
a. BUBBLE TRAVELERS b. SEASONED TRAVELERS

12. Can be a city, town, or other area. It is dependent on the revenues accruing from
tourism. It is marketed or markets itself as a place for tourists to visit. It may contain
more than one tourist attractions.
a. ACCOMMODATION b. TOURIST DESTINATION

13. This tour is accompanied by qualified, trained and experienced tour managers or
guides, who provide information and assistance to the group at the origin, en-route
and the destinations.
a. ESCORTED TOUR b. HOSTED TOUR

14. This tour is handled by the ground operator or destination management agency as an
representative of wholesale tour operator for making ground services like cab, coach,
guide, confirmation of hotel rooms, tool taxes, entry tickets, etc as per the contract.
a. ESCORTED TOUR b. HOSTED TOUR

15. Depicts the places of interest, types of services, nature of operation and conditions.
Information related to the mode of transport, accommodation, and other related
services is clarified in order to avoid ambiguity and confusion.
a. TOUR BROCHURE b. MAGAZINE

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 UNIT I - INTRODUCTION TO TRAVEL AND TOURISM BUSINESS

LEARNING OUTCOMES:
1. Evolution of Travel Business
2. Meaning and concept of travel business
3. Difference between travel agency and tour operator
4. Types and organization structure of TA and TO
5. Types of Tourism

Tourism has turned out to be an economic booster contributing to the economic

development of many countries over the last few decades. People see holidays as a necessity,
and not as luxury in the present scenario. Tourism calls for coordination and cooperation
between travel agents, tour operators, and tourists. Tourism has a few major elements —
destinations, attractions, sites, accommodation, and all ancillary services.

WHAT IS TOURISM?
Tourism involves the activities of people travelling and staying in a place away from
their home environment for leisure, business or other purposes. Mathieson and Wall (1982)
define tourism as follows:

"The temporary movement of people to destinations outside their usual places of work and
residence, the activities undertaken during their stay in those destinations, and the facilities
created to cater to their needs."

Tourism was mainly been traditional in its early form. With the evolution of cultures,
economies, and knowledge, tourism took a different form called sustainable tourism with
the aspect of well-planned tour, well-studied destination, and conservation of destination.

WHAT IS TOURISM MANAGEMENT?

It involves the management of multitude of activities such as studying tour destination,
planning the tour, making travel arrangements and providing accommodation. It also
involves marketing efforts to attract tourists to travel to particular destinations. There is a
subtle difference between just travelling and tourism.

Travelling is going from the place of residence or work to another distant or a

neighboring place by any means of transport. Routine commutation can be termed as
travelling.

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 Tourism is travelling with an objective. All tourism necessarily include travel but all
travel does not necessarily include tourism. We can say, travelling is a subset of
tourism.

One similarity between travel and tourism is, they both are temporary movements.

EVOLUTION OF TRAVEL BUSINESS

The use of the term travel trade dates back from the early years of the 19th century,
but this should not obscure the fact that what we describe today as travel trade (travel
agency and tour operation business) was taking place much earlier in history. Throughout
the history, there were travel middlemen who helped the merchants traveling for trade and
others who traveled for religious purposes. Let’s trace the historical development in travel
trade – in world as well as in India.

In 1670, the Grand Tour concept was developed especially for educational purposes.
Another major development took place in the year 1730. Health experts suggested that sea
water is found to be useful to cure many diseases. The result was that many resorts around
the English Coast were established to attract visitors seeking to cure themselves by sea
water. In 1815, steamboat services were introduced from London to Gravesend. One effect
of this development was the construction in all major resorts of a pier to accommodate the
vessels on their arrival. In 1820, European cultural centers were opened to British travelers.
The rail link was introduced between Liverpool and Manchester in a1830. In 1838,
Peninsular and Oriental (P&O) Steam Company introduced steamship services to India and
Far East.

The 2008 marks the 250th anniversary of Cox & Kings, the longest established travel
company in the world. The company’s history stretches back to May 1758 when Richard Cox
was appointed as regimental agent to the Foot Guards, later the Grenadier Guards, by Lord
Ligonier during the French and American Indian War. There was not a strict code for the role
of an agent; in essence they arranged the payment of officers and men, organised the
provision of clothing, acted as a go between for the buying and selling of officers’
commissions and acted upon any special requests from the regimental adjutant. This ranged
from the shipment of personal effects to the requisition of weapons or supplies. Such was
Cox’s success that by the end of the 18th century the company acted as agents for 14 cavalry
regiments, 64 infantry regiments and 17 militia regiments, becoming the largest military
agent for the army. Through partnership with the Drummond family the company had also
become involved in banking. In 1922 the company merged with the Henry S. King bank and,
although the banking business was sold the following year, the Pall Mall building was opened
as the Cox & Kings branch. It has been a long and eventful journey since then and it offers a
one-stop shop for the travel needs of all segments of travelers. It specializes in Destination

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Management, Leisure Travel MICE, NRI Holidays and Trade Fairs. Cox & Kings continued to
flourish after the two World Wars and today it thrives as an independent travel company,
with associated operations in India, Japan and the USA.

A fortunate day came in the history of travel trade when in 1841, Thomas Cook as
secretary of the South Midland Temperance Association, organized a trip by train for 570
members of his association to a distance of 22 miles. He bought railway tickets in bulk to sell
them back to the people. The experiment was successful and everybody was exultant.
Initially Cook had done his job on a no profit basis. But, incidentally, it gave him a new idea
and he turned it into a tour business. Four years later, in 1845, he set up the ‘World’s First
Travel Agency’ to organize excursions. Due to this innovative approach, Thomas Cook is
known as the Father of the Travel Agency Business. He coordinated railway and steamship
excursions throughout England, Scotland and Europe. However, railways used to give him
only 5 % commission which was not enough to meet his overheads. So he decided to diversify
this business into tour operation. In 1855, Cook started operating package tours. He
conducted the world’s first international tour from England to Paris. This was an inclusive
tour and in this way he developed the concept of inclusive tour.

It was a sheer coincidence that in the same year 1841, Henry Wells started his freight
business in USA. Thomas Cook’s company is still by the name Thomas Cook and Sons while
Henry Well’s company is known as American Express. In 1870, in order to eliminate payment
in cash, Thomas Cook introduced two systems: Traveler Cheque and Hotel Voucher; while
American Express introduced Credit Cards and Traveler Cheques.

MEANING & CONCEPT OF TRAVEL BUSINESS

Travel business is an economic activity, which is related with continuous and regular
buying and selling of travel related services for satisfying human wants. Travel industry has
been agreed as a service industry. In tourism, service is anything which is provided to the
traveler to travel, stay and involve in tourism activity. Travel has fascinated human beings
throughout the ages. During the past time travel was there but ‘tourism’ was not there.
Because travel was not undertaken for the purpose of pleasure and their motive was not to
seek holiday from the daily routine works. When people learned to differentiate between
work and leisure then tourism started. When business agencies were developed to sale
travel related services then tourism industry started and travel business flourished.

Tourism is related to broader economic and social issues including commodification

and globalization of culture, hospitality, friendship, pleasure, and place and its attractions.
Within this realm, tourism is regarded as experience industry where travel experience is sold
as a commodity just like other household, recreation-oriented products. Therefore, tourism
is related to travel, stay and involvement of people in tourism activities. Their travel and stay

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need to generate economy and economy is generated by service. For this there should be
buying and selling process. Only travel business are able to involve in motivating travelers
to travel, organize travel formalities, and provide travel related services and they can sale
tour.

Travel business is a complex concept as the industry includes many activities, which
together produce the tourist product that is travel experience. It is also complex due to
various sub-sectors of the tourist products. Tourism is a single industry but it is made of
different industries such as hotel, airlines, travel agency, trekking agency etc. Each one of
them provides individual product or they combine together to provide travel experience.
Any visit to a tourism destination comprises a mix of several components of different
organizations. A traveler may buy all the travel components from a commercial supplier, for
example a travel agency, as a single product or may buy travel components individually from
different suppliers. The buying and selling of all such travel related services constitute travel
business.

TRAVEL AGENCY
Travel agency is one of the most important organizations in the tourism private sector
that plays a significant and crucial role in the entire process of developing and promoting
tourism in the country or at the destination. It is a travel agency which packages and
processes all the attractions, accesses, amenities and ancillary services of a country and
presents them to the tourists. That’s why travel agencies are known as image builder of a
country. A prospective travel agency is one that makes arrangement of travel tickets (air,
rail, road and sea); travel documents (passport, visa and other documents for travel),
accommodation, entertainment and other travel related services from the principal
suppliers. It may also secure travel insurance, foreign currency for the traveling people.

A travel agency may either be one of a chain of retail outlets or a single operation. The
work of the larger agencies is often divided between different divisions, e.g. counter service,
business travel and foreign exchange. In smaller concerns each member of the staff will have
to handle many aspects of the agency's business. Some agencies limit their activities to
arranging travel and/or holidays to a specific area, but most cater for a very much wider
demand and fulfill all the functions associated with acting as intermediary between the
providers of holidays, transport, accommodation etc., and the client. Companies that deal
only with business travel are called Business Travel Houses. They may also be responsible
for dealing with the planning, publicity and bookings for trade fairs and conferences.

Travel agency sales clerks take bookings on behalf of tour operators, sell tickets for
travel, make hotel bookings, take payments from the public and give advice, on types of
holidays, methods of travel, passports, visas, travelers cheques, foreign currency etc., They

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need to have a good knowledge of the products and destinations offered by the tour
operating and travel companies. Managers and assistant managers are responsible for the
day-to-day operation of branch offices. This includes staffing, marketing, accountancy,
complaints etc. Travel managers should have professional qualifications and experience. In
a small agency training will probably be on-the-job. Large companies may offer a training
programme. The main features of travel agency business are:

An important link between the clients and principal suppliers.

Image builder.
Ensures rapid travel service.
Provider of authentic and reliable travel information.
A social and continuous process.
Establishes good relationship with clients and vendors.

TYPES OF TRAVEL AGENCIES

Retail Travel Agency: A retail travel agency sells tourist products directly to the
public on behalf of the product suppliers and in return gets commission. Some
package tours are sold in two ways i.e. on a commission basis and mark-up price.
When a travel agency sells a tour package on marked up price, it means that first it
marks up the cost of a tour and then sell it at a higher rate. The mark up price is the
difference between retail price and wholesale cost.

A retail travel agency is defined as ‘a business that performs the following functions:
quote fares and rates, make reservations, arrange travel tickets and accommodation, arrange
travel insurance, foreign currency, documents and accept payments.’ The main source of
revenue for a retail travel agency is the commission received from the vendors. However, the
rate of commission differs from organization to organization and travel component to travel
component. In India, retail travel agencies receive ninety five percent of their revenue from
commission and the remaining five percent from consultancy services.

Wholesale Travel Agency: These agencies are specialized in organizing package

tours, which are marketed to the customers/tourists through the network of a retail
travel agency or directly to the prospective clients (if the wholesale travel agency has
a retail division). A wholesale travel agency purchases tourist product components in
bulk and designs package tours. Sometimes, a wholesale travel agency buys travel
components from a vendor in bulk and resells them to another travel business
organization.

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 Wholesale travel agencies assemble package holidays and sell them to the clients by
retail travel agencies. A typical package tour includes – air ticket, accommodation and
sometimes other services may also be included in it such as entertainment, sightseeing and
sports activities etc. These packages are referred to as ‘package tours’ as most of these tours
include the services of escorts but a few are sold to people who wish to travel independently.
How a wholesale travel agency generates profit? Generally a wholesaler receives volume
discounts from principal suppliers because a wholesaler might agree to purchase a large
number of seats from a particular airline or reserve a large number of rooms at a particular
hotel and resort.

Practically, a wholesaler who sells package tours is called a tour operator. However,
technically there is a difference between a wholesaler and a tour operator. A wholesaler who
sells tourists products individually without assembling them into package tours is called a
consolidator. Mostly, these are specialized in a particular product component, such as air
tickets, accommodation, conferences and conventions etc.

TOUR OPERATOR
An organization, firm or company which buys individual travel components,
separately from their suppliers and combines them into a package tour, which is sold with
their own price tag to the public directly or through middlemen is called a tour operator.
More precisely, tour operators are mainly responsible for delivering and performing the
services specified in a given package tour. They can provide these services themselves as
some have their own cars and coaches, hotels and other travel related services or can obtain
these from other suppliers. That is why they are called manufacturers of tourism products.

Tour operators are sometimes called wholesalers but this is partially true because a
wholesaler buys goods or services in bulk at his own account to prepare a tour package and
then retails it through the travel agencies or directly to the clients. However, a tour operator
who has his own one or more tourist product components formulates a new tourist product
for example ‘inclusive tours’. Tour Operators generally offer variety of package tours to cater
to the needs of different kind of travelers.

Although the holidays which are 'manufactured' by tour operators are usually sold by
travel agents, some companies have their own retail outlets or sell direct to the public. Thus
the work of a large operator may encompass all the stages in the production and sale of a
holiday. The larger the company, the more specialized each employee's role becomes, e.g.
there are those concerned with negotiating the various components of a holiday with
carriers and hotel owners etc., those who produce the brochure or 'label' of the product,
those involved with the research and development of new ideas or marketing them, and

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those dealing with reservations, they also have separate finance, personnel and other
administrative departments.

TYPES OF TOUR OPERATORS:

Inbound Tour Operators: These are also known as incoming tour operators.
Technically, the operators who receive guests, clients/tourists and handle
arrangements in the host country are called inbound tour operators. For example, a
group of American tourists coming through TCI to India and the company makes
arrangements and handles the group in India, then TCI is called an inbound tour
operator. Incidentally, the inbound traffic to the country for the last two decades has
been decreasing. Essentially, tour operators need to adopt innovative marketing
strategies and should introduce special interest tours to cater to special needs of the
foreign tourists.

Outbound Tour Operators: Tour operators, who promote tours to foreign

destinations, may be business tours or leisure tours are called outbound tour
operators. Indian outbound tourist traffic is growing at a rate of 10 percent annually
and this makes India the second largest country in the world with regard to the
traveling population. However, India’s outbound tourism is not only holiday oriented
but it is business oriented too. There are many travel companies which offer
outbound packages such as SITA, TCI, Thomas Cook etc.

Domestic Tour Operators: Domestic tour operators are those who assemble and
combine tourist components into inclusive tours and sell it to the domestic travelers.
In general, these tour operators provide travel services within the boundary of home
country and offer package tours to the travelers viz. domestic inclusive tours or
independent tours.

Destination Management Companies/ Ground Operators: These are commonly

known as handling agencies and their main function is to organize tour arrangements
for incoming tourists on behalf of overseas operators. When a tour operator himself
promotes beach holidays, wildlife holidays, wildlife tours, heritage tours, cultural
tours at different places, the difficulty arises. It is the ground operator then who by
handling the incoming travelers in the same season but at different places ensures
that the entire operation is according to the package tours or agreements. Sometimes
when a handling agency is at a prominent tourist place, for example Delhi and it has
to make arrangements to Goa, then it contracts (if it has no office of its own) with a
local operator (known as excursion agent) to handle the arrangements on his behalf.

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DIFFERENCE BETWEEN TRAVEL AGENCIES AND TOUR OPERATORS
The major difference between tour operators and travel agencies is in the system of
providing service to customers. A tour operator is a company that buys certain
services from different companies (like hotels, restaurants, cafes, beauty salons) and
forms a single tourist product out of them using its own pricing system. A travel
agency acts like an independent reseller. Its profit is the commission for the sale of
the operator's tours to customers. That's why the agent's price is usually higher,
although there are moments when agents deliberately understate their prices.
Usually a tour operator is a comparatively large company in comparison with a travel
agency. It has its main office and several subsidiaries in order to offer their services
to more potential customers. Many big tour operators have subsidiaries in different
countries. Irrespective of the number of subsidiaries a tour operator usually
concludes agent agreements with independent travel agencies that then sell the
operator's tours to their customers. The more partners a tour operator has in as many
countries and regions as possible, the more the sales volume is and, correspondingly,
the more tourists will buy its tours and the more profit it will gain.
A tour operator may be a supplier (meaning they might own hotels or car rentals or
both) and allow to use their own inventory or their supplying partner inventories for
a fee. A travel agent is only a distributor, and typically travel agents rarely own any
travel assets (such as car rentals or hotels) of their own
Travel agencies are less inclined than tour operators to perform ground services i.e.
to act like a handling agency or ground operator.
A travel agency may deal with one component of travel product while a tour operator
offers a variety of tour programmes.

ORGANIZATIONAL STRUCTURE OF A TRAVEL/TOUR COMPANY

The organization of a travel/ tour company largely depends on the size and type of
the business handled by it. Generally, in a small and medium scale travel agency/ tour
operator, one will find a simple organization structure being limited in terms of operation,
size, division of labor and so forth. Whereas in large scale travel companies such as Thomas
Cook, TCI, SITA etc., the organization structure is more formal.

A sound organization structure of a travel company brings following benefits to the travel
business:
Develop sound and up-to-date management practices, systems and strategies.
Develop effective leadership.
Growth and diversification.
Optimum use of ‘human asset’.

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 Stimulates creativity.
Effective coordination between various departments.

The organizational structure of a travel/tour company is the formal or quasi-formal

network of reporting or controlling relationship and the powers and duties associated with
each role in this network. The network of reporting relationship is commonly depicted
through an organization chart. But there are many travel companies, mostly young and small,
in which the structure is implicit rather than explicit. However, it has been observed that a
travel company will operate functions most effectively and efficiently if an explicit
organization structure is designed or adopted. Practically organization charts do not exist
nor does the role description. Yet, if one views around, one can discern a hierarchy of
authority, some division of work, some specialization in functions, some role specialization
and so forth, which are the hallmarks of an organizational structure.

The organization structure of a large travel/ tour company is shown in Figure 1. The
chart depicts the visible ‘super structure’ of departments and the important reporting and
functional relationships in the organization of a travel company. The structure consists of
managerial hierarchy from top level to junior level managers and assistants. Normally, a
large scale travel company has two parts – Head Office and number of branches within the
country and abroad. It is also common that the headquarters/registered offices would have
several divisions such as research and planning, travel and tour division etc. and so forth.
However, in the branches, one will find a few departments according to the requirements of
specialized particular areas. Obviously in designing organization structure, a travel company
is free to use any means of departmentation that are appropriate to its business operation,
type of customer - traveler corporation, its services and specific functions and activities to
achieve a mission or goals and the core values etc.

TYPES OF TOURISM
Mass Tourism. It involves tourism of organized large groups of people to special
tourist locations. It is a traditional way where the daily program is fixed by the tour
organizer. It is a social activity. The tourists generally desire for souvenirs and site-
seeing. For example, religious places, theme parks, boat cruises, resort towns.
Alternative Tourism. It includes individually organized tours to find first-hand
information about a place, local culture, and environment. For example, biking tour
planned by an individual while accommodation is catered for on the go.
Business: It is touring for conducting business transactions, attending business
meetings, workshops, or conferences. The objective of business tourism is mainly
professional.

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 Pleasure: It includes tourism for improving one’s physical or spiritual well-being. For
example, vacation at a Yoga or rehabilitation center.
Nature: It is tourism at places famous for pristine nature and serene beauty. The main
objective is to experience and enjoy nature such as farms and wildlife. Ecotourism is
a part of nature tourism.
Cultural: This type of tourism has an objective of understanding the local history of
the place, foods, local productions, and local culture.
Social: It includes tours conducted among relatives, friends, and others.
Recreational Tourism: It includes travelling to escape from routine life. This is often
done for enjoyment, amusement, or pleasure. For example, Camping or beach visit.
Active Tourism: It is conducted with a clear objective such as climbing a mountain,
touring around the world, or learning local culinary arts or languages.
Sports Tourism: It is tourism for attending some sports event such as World Cup
Cricket Match, FIFA, or Olympics.
Religious Tourism: It involves travelling to places of religious significance such as
Vaishno Devi in Jammu-Kashmir and Golden Temple at Amritsar (India), Mecca in
Saudi Arabia, Bethlehem, and other such places.
Health or Medical Tourism: It involves travelling to improve one’s health. It is with
the objective of visiting weight-loss camps, naturopathy centers, and health resorts.
Adventure Tourism: It involves tourism for adventurous activities such as rock
climbing, bungee jumping, sky-diving, hiking, horse-riding, surfing, rafting, or skiing.

MARKET TRENDS & TRAVEL AGENCY BUSINESS SCENARIO

There has been a gradual decline in the number of travel agency business around the
world which can be attributed to some very tangible factors. The first was shrinking
airline commissions beginning in 1995 and continuing until 2002, when they were
eliminated. So, after decades of offering travel agents a standard commission of 10
percent or more, with no cap, many of the larger carriers stopped paying base
commissions to travel agents. These changes in the commission system driven by the
airlines altered the distribution system fundamentally. Agents were no longer paid to
process transactions.
To offset the loss of commissions, agents had to develop new sources of income. The
most readily available source was service fees. In addition to charging fees, agents
have also turned to selling more cruises and tour packages and shifted to an emphasis
on leisure travel. Service fees put agents at a price disadvantage because when
airlines sell directly to passengers online, they do not add a separate fee to cover their
own distribution costs. Therefore, an airline-direct fare for the same seat for the same
journey is lower than a comparable ticket offered by an agent charging a fee. That

15
 provides an incentive for the customer to deal directly with the airline and reduces
the agent’s share of the distribution pie.
A second major factor is the Internet, which has impacted travel purchase behavior.
The Internet has changed the way commerce is conducted. Many businesses use the
Internet as a way to bypass product and service intermediaries and deal directly with
consumers. The airlines have been a leader in aggressively using e-commerce. The
major carriers built powerful websites where passengers could make reservations,
review frequent flyer accounts, and check on the status of flights. As a result, airline
online bookings increased, as did the depth of information airlines were able to collect
on customers. Such information gave the airlines a marketing advantage in creating
direct relationships with consumers. The relatively low cost of e-mail marketing
enabled the airlines to contact customers more frequently and less expensively than
through the mail.
In parallel with airline website development, online travel agencies invested large
sums to improve their sites and presence. Since 1995, a number of online booking
and fare search sites have appeared (and disappeared), disseminating almost
unlimited information on any possible destination and thus creating more interest in
travel. Consumers searched for information and booked online to make travel the
most successful commercial sector on the Internet.
Another important factor is that airlines now attempt to bypass travel agents. As
more people have Internet access and are willing to purchase over the web, airlines
have adapted the strategy of selling direct, diverting business away from travel agents
and dealing directly with the passenger. This has two advantages: (1) reduced
distribution costs and (2) increased control over passenger information. Sale of travel
over their own airline sites has not only reduced CRS booking fees and commission
costs, it has also attracted passengers who have previously used travel agents.
The Internet has become the distribution channel of choice for the airlines, and they
are aggressively pushing sales on their own sites. Traditional travel agents will
continue to compete for sales with airline seats and online agencies. While the above
explains some major reasons why there has been a decrease in the number of travel
agents, they have not gone away and are still on the major distribution channel for
travel. They will maintain that position as long as they continue to deliver valuable
service and save clients time and money.

BUSINESS INTEGRATION
All business is highly competitive, and the tourism industry is no exception to this
rule. Competition forces companies to seek ways of becoming more efficient in order to cut
costs. Integration makes this possible by enabling companies to benefit from economies of
scale. By producing and selling more of a product, the supplier reduces the unit cost of each

16
product, since the fixed costs incurred are spread over a larger number of units, whether
these are hotel bedrooms, aircraft seats or package tours. At the same time, buyers of these
products, such as tour operators, can obtain lower net prices if they buy in large quantities,
just as airlines can negotiate lower prices if they order more aircraft from the manufacturers.
The savings achieved through both these economies of scale can be passed on to clients in
the form of lower prices, making the product more attractive to the consumer.

In addition to these broad benefits offered by integration generally, there are other
advantages specific to horizontal or vertical integration. Horizontal integration can take
several forms. One form is the integration between two companies offering competing
products. Two hotels may merge, for example, or two airlines competing on similar routes
may unite. A second form of horizontal integration occurs between companies offering
complementary rather than competing products. Close links therefore form between the
accommodation and transport sectors, which are interdependent for their customers.
Without hotel bedrooms available at their destinations, airline passengers may be unwilling
to book seats, and vice-versa. Recognition of this dual need has led many airlines to buy into
or form their own hotel divisions, especially in regions of high tourist demand, where bed
shortages are common.

As with horizontal integration, organizations can achieve significant economies of

scale by expanding vertically. Vertical integration is said to take place when an organization
at one level in the chain of distribution unites with one at another level. This integration can
be forward (or downward in the direction of the chain) such as in the case where a tour
operator buys its own chain of travel agents, or it can be backward (or upward against the
direction of the chain) such as in the case where the tour operator buys its own airline.
Forward integration is obviously found more commonly, since organizations are more likely
to have the necessary capital to buy businesses further down the chain of distribution, which
require less capital investment. For example, even the largest travel agency chain would be
unlikely to have the capital needed to form its own airline.

17
 UNIT I – ACTIVITIES

Identification.
1. Involves the activities of people travelling and staying in a place away from their
home environment for leisure, business or other purposes.
2. The temporary movement of people to destinations outside their usual places of work
and residence, the activities undertaken during their stay in those destinations, and
the facilities created to cater to their needs.
3. It involves the management of multitude of activities such as studying tour
destination, planning the tour, making travel arrangements and providing
accommodation. It also involves marketing efforts to attract tourists to travel to
particular destinations.
4. The longest established travel company in the world.
5. He set up the ‘World’s First Travel Agency’. Known as the Father of the Travel Agency
Business.
6. An economic activity, which is related with continuous and regular buying and selling
of travel related services for satisfying human wants.
7. Packages and processes all the attractions, accesses, amenities and ancillary services
of a country and presents them to the tourists.
8. An organization, firm or company which buys individual travel components,
separately from their suppliers and combines them into a package tour, which is sold
with their own price tag to the public directly or through middlemen.
9. It involves tourism of organized large groups of people to special tourist locations. It
is a traditional way where the daily program is fixed by the tour organizer.
10. It is tourism at places famous for pristine nature and serene beauty. The main
objective is to experience and enjoy nature such as farms and wildlife.

Unit Discussion.
1. Give a brief overview of the evolution of travel business.
2. Discuss the difference between a travel agency and a tour operator.
3. Explain 5 different types of tourism and provide examples.

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 UNIT II - MOTIVATION FOR TRAVEL

LEARNING OUTCOMES:
1. Basic travel motivations
2. Sociology of tourism
3. Promoting social tourism
4. Social significance of travel
5. Evolution of demand
6. Factors affecting Tourist behavior
7. Factors influencing the growth of tourism

Tourism demand is the total number of persons who travel or wish to travel to use the tourist
facilities away from their places of work and residence. (Mathieson and Wall, 1982)

Tourism is a dynamic field. It varies on the number of factors related to the tourists;
the country of destination, the market from which the tourists emerge, and market of the
destination. The tourism managers and researchers study a lot about tourists’ motivations
and cultures, their changing behavior, and the driving and affecting factors of tourism. They
also study the destinations investigating the amenities and attractions they provide or any
prospective ways to attract the tourists.

The tourism businesses can figure out the demand of tourism in a particular area, by
identifying the types of various tourists, their behaviors, and create right offerings for the
right market.

Let us see, the types of tourists and how tourist behavior varies with respect to various
factors.

TYPES OF TOURISTS
There are different types of tourists −
Intrinsic Tourists − They are into holidaying for the sake of enjoyment.
Extrinsic Tourists − They have reward oriented motivation. These tourists are
susceptible to the activities where performance is evaluated.
Adventurers − They give very little importance to relaxation. They are always up to
exploring places and taking challenges. Mainly youths and singles from both genders
carrying zest of life largely contribute to this type of tourism.

19
 Budget Travelers − They are economy-oriented tourists. Their touring decisions
about places, travelling mode, and other related factors are largely dependent on
their financial status.
Homebodies − They are mainly relaxed tourists. They do not get into adventure. The
tourists aged above 45 to 50 years belong to this type. The busy professionals under
45 years also belong to this type.
Moderates − They plan their tour ahead, have a high inclination towards tourism but
they do not get into sports or adventure activities.
Vacationers − They plan touring during vacations such as summer break or
Christmas break. They are not always sure of where and why they wish to visit.

Motivation of the tourists stems from the domain of human psychology. It is the
satisfaction-forming factor. The factors of motivation can be categorized into two types –

1. Internal Factors of Motivation – Internal factors arouse, direct, and integrate a

person’s behavior and influence his decisions for travelling.

Intrinsic Motivation − For many people, tourism is a way of satisfying their

psychological needs such as travelling, performing leisure activities, exploring
novelty and capabilities, self-expression and self-assurance, creativity, competition,
need for relaxation, and belongingness. The intrinsic motivations pertain to assuring
one’s capabilities on different emotional fronts. Intrinsic motivation drives the
tourists to opt for tourism for intangible rewards such as fun, assurance, and other
emotional needs. The other intrinsic factors of motivation are:
o Attitudes of Tourist − Knowledge of a person, place, or object + Positive or
negative feelings about the same.
o Tourist’s Perception − By observing, listening, or getting knowledge, a
tourist forms the perception about a place, person, or an object.
o Values or Beliefs − A tourist believes or values a specific mode of conduct
which is acceptable personally or socially.
o Personality of the Tourist − The nature and physique of a tourist plays an
important role towards motivation in tourism.

2. External Factors of Motivation – There are external motives in tourism that can
influence tourists and pull them towards a certain motivation and subsequent
decision.

Extrinsic Motivation − Here, a tourist gets motivated by external factors such as

money and the need to feel competent on the scale of expenditure and performance.

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 Place of Origin − The grooming of the tourist depends upon the place of its origin.
For example, for the Indian married women, the tourism might come last in the list
of preferential things they wish to do whereas for American ladies, tourism would
acquire much higher rank.
Family and Age − The family matters when it comes to the structure and the income.
Today, the families with nuclear structure and double income tend to opt for long
distance, extravagant tourism more than joint families or families with single
earning member who are interested in visiting domestic places. The tourists also
have different preferences of places according to their age. For example, tourists in
the age group of 5 to 45 years might enjoy visiting destination in the USA such as
Disneyland more than the senior citizens.
Culture or Social Class − Tourists of different cultures prefer different places,
events, and different types of tourism. In addition, if friends and families who have
visited a place earlier spread the first hand information that motivates the others to
visit the place too.
Market − Ever-changing market variables alter tourism. Changes in value of
currency, political situations, and economic well-being of the country influence the
decisions of a tourist.

MASLOW’S PYRAMID OF MOTIVATION

An American psychologist and a professor of the 20 th century, Abraham Maslow
proposed a theory on the hierarchy of human needs. It can be depicted as a model of five
basic motivational needs any human being has. These needs are −

Physiological (or Biological) − Need for air, food, water, shelter, warmth, and sleep,
which are required for the survival.
Safety − Need for safety from harmful elements, freedom from fear, physical safety,
economical safety, safety against accidents or their negative impacts. Safety may also
manifest into security such as job security and financial security.

21
 Social − Need for having a family, need for intimacy, friends and social groups. Need
for belonging and being accepted and loved by others.
Self Esteem − Need of feeling accepted and respected by others, need for recognition
and attention from others.
Self-Actualization − Need to realize one’s full potential. A human being requires to
attain this need after all the above needs are satisfied.
This pyramid helps to understand the priorities of the human needs in the order
depicted. As we can see, the tourism covers the bottom four levels of the triangle.

CONSUMER BEHAVIOR IN TOURISM

Consumer behavior is one of the most researched areas in tourism. This studies why
a tourist chooses a particular destination and what are the driving factors that influence his
decision for travelling.

FACTORS AFFECTING TOURIST BEHAVIOR

The following factors immensely alter tourist behavior −
Geographical Factors − Some physical factors like geographical and climatic
conditions, facilities and amenities available at the destination, advertising and
marketing conducted by tourism business alter the decision making of the tourists.
Social Factors − A few social factors such as a person’s social network, which
provide first had information that can alter a person’s decision of visiting or not
visiting a particular place.
Place of Origin − There can be a broad spectrum of tourist behavior depending upon
the place they belong to. North Americans like to follow their own cultural
framework. Japanese and Korean tourists like to visit places in groups.
Tourism Destination − It is a major contributing factor altering tourist behavior. If
a destination has all basic provisions such as electricity, water, clean surroundings,
proper accessibility, amenities, and has its own significance, it largely attracts
tourists.
Education of Tourist − The more educated the tourist is, the wider range of choices,
curiosity, and the knowledge of places he would have. This drives the decision
making when it comes to choosing a destination.

INTRINSIC AND EXTRINSIC TOURIST BEHAVIOR

The difference is as follows −
INTRINSIC BEHAVIOR EXTRINSIC BEHAVIOR
They record higher level of satisfaction and They record comparatively lower level of
enjoyment as they see an activity as a mean enjoyment as they go through the stress of
of enjoyment itself. competition.

22
 Time passes faster for them. They are focused on passage of time.
They record a higher level of enjoyment. They tend to be tensed for performance and
could be apprehensive, which hinders their
enjoyment and relaxation.
They look forward to the next similar They look forward to the same experience in the
experience in the moderate to long span of short span of time.
time.

PLOG’S MODEL OF TOURISTS BEHAVIOURS

Plog classifies tourists into three categories as described below −
Allocentric (The Wanderers) − A tourist who seeks new experiences and
adventure in a wide range of activities. This person is outgoing and self-confident in
behavior. An allocentric person prefers to fly and to explore new and unusual areas
before others do so. Allocentrics enjoy meeting people from foreign or different
cultures. They prefer good hotels and food, but not necessarily modern or chain-type
hotels. For a tour package, an allocentric would like to have the basics such as
transportation and hotels, but not be committed to a structured itinerary. They
would rather have the freedom to explore an area, make their own arrangements
and choose a variety of activities and tourist attractions.
Psychocentric (The Repeater) − A tourist falling in this category is usually non-
adventuresome. They prefer to return to familiar travel destinations where they can
relax and know what types of food and activity to expect. Such tourists prefer to drive
to destinations, stay in typical accommodations, and eat at family-type restaurants.
Midcentric (Combination) − This category of tourists covers the ones who swing
between the above said two types.

HENLEY CENTRE MODEL OF HOLIDAYMAKING

A British Consultancy of Futurology, Henley Center has divided the tourists into four
phases −
Phase I- Bubble Travelers − They do not have much money as well as knowledge.
They prefer packaged tours. They long to observe different cultures without being a
part of it. They travel mostly out of curiosity.
Phase II- Idealized Experience Seekers − They are confident tourists with the
experience of foreign tours. They are flexible and comfortable. They prefer tour
offers made for individuals.
Phase III- Seasoned Travelers − These tourists are more affluent than the
idealized-experience seekers. They are more confident to experiment and
experience different places and environments. They are more adventurous and
prefer individualistic tours.
23
 Phase IV- Complete Immersers − These tourists have an intention of immersing
completely into the foreign culture, heritage, culinary experience, and language.
Their holidaying is well-planned but not well-structured.

In the above phases, the tourist goes through different phases and therefore also
seeks different tourism options or destinations.

FACTORS INFLUENCING THE GROWTH OF TOURISM

1. Environmental factors
Two main environmental factors that have led to the growth of tourism:

Good climate : Good climate is one of the most important features of attraction for
any tourist place. Pleasant climate with warmth and ample of sunshine attracts
tourists who come from the temperate and colder regions. For example, most of the
sea-side resorts in U.S.A and U.K are located on a warmer southeast. On other hands,
people from summer areas migrate to cooler regions to seek pleasure of cold fresh
environment. For instance, in India places like Lonavala, Mahabaleshwar near
Mumbai, Kullu and Manali, Shillong, Kashmir, so on are well-known for their cool and
pleasant climate. Other countries with cooler climate that attract tropical tourists are
Switzerland, Sweden, etc.
Beautiful scenery: Tourism booms at picnic spots with beautiful sceneries. For
example, sunrise and sunset points, long sea beaches, fresh water lakes, waterfalls,
etc., often attract large numbers of tourists.

2. Socio-economic factors
Four important socio-economic factors that influence the development of tourism:

Accessibility: Of all socio-economic factors, accessibility is the most important one.

All tourist centers must be easily accessible by various modes of transportation like
roads, railways, air and water. To enjoy nature's beautiful sites seeing traveling by

24
 roads and railways is a better option. If a tourist plans to reach a remote tour-
destination in the quickest possible time, then airway is the most suitable choice.
Generally, waterways are seldom selected unless a tourist decides to enjoy a luxury
cruise experience in sea and/or interested to visit an isolated archipelago.
Accommodation: Places of tourists' interest must be capable enough to provide good
accommodation and catering facilities. A type of accommodation required by tourists
depends on their lives-styles, standard of living, capacity to spend money, nature of
services expected, etc. Classification of accommodation centers (i.e. various hotels,
motels, dormitories, etc.) on basic of rating like five stars and below are essential so
that tourists can make a proper choice and plan their trips appropriately. Generally,
tourism mostly prospers in those areas where good lodging and food facilities are
available at reasonable prices.
Amenities: Growth of tourism at a particular place is also influenced crucial factors
like; how well the site is maintained for touring activities like skiing, roping,
paragliding, rowing, fishing, surfing, safari adventure, etc. Whether emergency
facilities are available or not, so on.
Ancillary services: If a tour destination is equipped by ancillary (supplementary)
services like banking and finance, the Internet and telecom connectivity, hospitals,
insurance, so on, then such a place succeeds to hold (retain) more tourists for a longer
time. This overall helps to boost the local economy to some extend.

3. Historical and cultural factors

Many tourists are attracted to places of historical significance and that which have a
legacy of rich cultural heritage. People love and enjoy exploring destinations where there are
famous ancient monuments, marvelous forts, castles and palaces of earlier kings and queens,
etc.
Examples of places that are famous throughout the world for their historical and cultural
accounts are; Taj Mahal in India, Nazca lines and Machu Picchu in Peru, Pyramid of Giza in
Egypt, Great wall of China and Stonehenge in England.

4. Religious factors
People often make pilgrims to places of religious importance to seek inner peace, get blessing
of their favorite deities and gurus, attain salvation before death, etc. Here, faiths, beliefs and
sentiments of people contribute in booming tourism at holy places.

Examples of places that are well-known for their religious significance are Jerusalem in
Israel, Mecca and Medina in Saudi Arabia, Varanasi and Amritsar in India, etc.

5. Other factors

25
 Sometimes other factors also contribute toward growth of tourism at unexpected
places.
For example, UFO crash site in Roswell, New Mexico (USA) attracts many tourists from
around the world.

Research activities and adventures of deep seas and caves, geological studies of hot-water
springs and geysers, seismic analysis of active volcanoes, investigation of paranormal-
activities in abandoned ghost towns, etc. also contribute in developing tourism on some
scale.

26
 UNIT II – ACTIVITIES

Identification.
1. They give very little importance to relaxation. They are always up to exploring places
and taking challenges. Mainly youths and singles from both genders carrying zest of
life largely contribute to this type of tourism.
2. They have reward oriented motivation. These tourists are susceptible to the activities
where performance is evaluated.
3. They are mainly relaxed tourists. They do not get into adventure. The tourists aged
above 45 to 50 years belong to this type. The busy professionals under 45 years also
belong to this type.
4. Need for air, food, water, shelter, warmth, and sleep, which are required for the
survival.
5. Need to realize one’s full potential. A human being requires to attain this need after
all the above needs are satisfied.
6. A tourist who seeks new experiences and adventure in a wide range of activities. This
person is outgoing and self-confident in behavior.
7. A tourist falling in this category is usually non-adventuresome. They prefer to return
to familiar travel destinations where they can relax and know what types of food and
activity to expect.
8. They do not have much money as well as knowledge. They prefer packaged tours.
They long to observe different cultures without being a part of it. They travel mostly
out of curiosity.
9. These tourists are more affluent than the idealized-experience seekers. They are
more confident to experiment and experience different places and environments.
They are more adventurous and prefer individualistic tours.
10. These tourists have an intention of immersing completely into the foreign culture,
heritage, culinary experience, and language. Their holidaying is well-planned but not
well-structured.

Unit Discussion.
1. What are the factors influencing the growth of tourism? Explain each one.
2. Differentiate allocentric tourists and psychocentric tourists.
3. What is the difference between intrinsic and extrinsic motivations?

27
 UNIT III – DESTINATION MANAGEMENT

LEARNING OUTCOMES:
1. Role of DMO
2. Objectives of DMO
3. Characteristics of DMO
4. Tools for destination management

DESTINATION AWARENESS
Destination is the basic component of tourism. Identifying and capturing the essence
of the place is vital for the tourism business to do well. If an attractive place is turned into a
destination, the place generates high revenue from tourism. Today, Destination Management
is an important subject in tourism studies. It focusses on the development and management
of destinations to provide highly satisfying experience to the visitors without hampering the
local culture and environment.

WHAT IS A TOURIST DESTINATION?

A tourist destination can be a city, town, or other area. It is dependent on the revenues
accruing from tourism. It is marketed or markets itself as a place for tourists to visit. It may
contain more than one tourist attractions. For example, Roros, Norway is a destination with
the label of mining town since last 85 years.

HOW CAN A DESTINATION ATTRACT TOURISTS?

A tourist destination has certain characteristics that attract tourists to spend time
there. It can attract tourists for its inherent or exhibited natural or cultural value, historical
significance, flora and fauna, natural or built beauty, offering leisure, adventure and
amusement.

The following factors shape the destination appeal:

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THE FIVE A’S
The following five A’s define the tourist needs and demands:

Accessibility
It is the ability to reach to a place of destination by opting one or multiple means of
transportation. The transportation should be timely, convenient, inexpensive, and safe.
Today there are various means of transportation like airlines, railways, surface
transportation, and water transportation.
Accommodation
It is a place where the tourists can avail food and shelter on payment. Today, a wide range
of accommodations are available ranging from a basic budget accommodation to elite
class seven-star hotel suites.
Attraction
It is a place of interest where tourists visit, typically for its inherent or exhibited, natural
or cultural value, historical significance, or natural or artificial beauty. The attraction
creates a desire to travel to a specific tourist destination. They also offer leisure, comfort,
adventure, or amusement. For example, Paris draws tourists by offering Fashion as
attraction.
Activities
Activities are what the tourists perform for fun and amusement. For example, boating,
scuba diving, canoeing, camel riding, and visiting a place.
Amenities
Amenities refer to the beneficial services offered to the tourists like visitor information
centers, telecommunications, roads, drinking water, toilet blocks, garbage bins, etc.

TYPES OF TOURIST DESTINATIONS

There are various types of destinations as given below:

Centered Destination

29
 It is the most common type of tourist destination, where tourists spend most of their time
on occasional excursions to nearby places of attraction. For example, Andaman Island is
a centered destination.
Base Destination
It refers to that type of destination where tourists need to travel and explore surrounding
region. For example, Sossusvlei Desert Camp of Sesriem is a base destination from where
tourists can explore the nearby desert mountain dunes and Sesriem river canyon.
Multi-Centre Destination
Here the destination comprises two or more destinations of equal importance. For
example, India is a multi-center destination where each Indian state or region offers
different culture, nature, and culinary experience.

Touring Destination
A touring destination refers to a place to visit as part of linear itinerary.
Transit Destination
It is a place of a brief halt en-route while the tourists are heading towards the final
destination.
For example, Abu Dhabi is a transit destination where tourists take a short break for
going to Cape Town, South Africa.

WHAT IS DESTINATION MANAGEMENT?

Destination management is a coordinated process, where almost all aspects of a
destination are managed, including marketing efforts, local resources, accommodation,
activities, events, environmental concerns, tourist attractions and transportation. It is
usually the responsibility of a destination management company (DMC).

They adopt a holistic approach to managing tourism for their destination and may offer
additional services, like training. Destination management companies tend to be
membership-based and their members and stakeholders may include governments,
community leaders, local businesses, charities and others involved with travel and tourism.

WHY IS DESTINATION MANAGEMENT IMPORTANT?

Generally speaking, tourism can be extremely beneficial for an area or destination,
bringing more money into the local economy, helping to attract investment from businesses
and allowing existing businesses in the area to thrive. It can help to enrich and revitalize
villages, towns, cities, resorts, regions and countries.

With that being said, tourism can potentially bring downsides too, such as damage to
landscapes, extra pollution, more use of resources and traffic congestion. Tourism

30
management is, therefore, essential, weighing up pros and cons, looking out for businesses
and local residents, protecting the environment and balancing supply and demand.
Put simply, destination management involves taking the necessary steps to ensure tourism
adds value to a destination.

HOW TO EXECUTE DESTINATION MANAGEMENT

In terms of actually implementing a destination management plan, it is recommended
to break your strategy down into four key steps, which can be defined as follows:

1. Place – What is the Destination?

When considering the issue of place, you need to consider what your destination actually is,
how it can be defined and whether it requires destination management. In many cases, the
destination is obvious, in that it is a city, a state, an island, or even a whole country. However,
it could equally be defined by a mountain range, or a coastline.

One destination may be situated within another destination, which can also confuse matters.
The Great Barrier Reef is considered a destination, but so is the state of Queensland and so
is the town of Port Douglas, which both offer access to it. Why you are defining your
destination as you are? Why does it make sense to manage it collectively?

2. People – Who Are the Visitors and Key Partners?

As you think about people, you should ponder who visits your destination and what their
motivation for doing so might be. It may appeal to a number of different demographics, for
different reasons, or it might primarily appeal for a single reason. Where are visitors coming
from? What are they seeking? Are they families, groups or individuals?

You also need to give consideration to who makes up the local community, what their
priorities are, as well as who the key stakeholders and partners from the travel industry are.
These potential destination management partners may include local businesses, transport
service providers, activity centers, tour operators and more.

3. Product – What is On Offer?

Next, you need to be clear on what the destination has to offer tourists and other travellers.
What are they buying? What will their experience be? What can you promise people through
your marketing efforts? Accommodation, activities, attractions and transportation methods
can all fall under the product umbrella.

Does your destination have the ability to provide tourists with a memorable or unique
experience? Is your destination actually delivering this for people right now? If not, why not?

31
You need to think about where tourists are likely to spend their time and money, and what
their decisions mean for the area a whole.

4. Process – Destination Management in Action

Finally, when thinking about your process, you need to consider how you can actually make
sure the product and experience you are offering connects with the people who will be
travelling to your destination. Essentially, it means identifying precisely what needs to be
done to manage the destination properly, for optimal results.

It is important that this step is done last, because it requires you to have an understanding
of the other components. You need to already know how the place is defined, who the people
involved will be and what the product is. Then you can start to think about the effects of
tourism on your destination, where improvements are needed, and so on.

WHY MANAGE A DESTINATION?

Since tourism directly depends on the customer’s experience, collecting and auditing
tourists’ experience is vital. A deep understanding of the destination, the market, and the
tourists’ experience can help to target the needs, desires, and expectations of a particular
market segment.
The destinations are managed so that they provide excellent memorable experience to the
tourists in terms of accommodations, facilities, amenities, activities, and food with a
continuous upgraded progress thereby increasing the tourists’ influx and generating
revenue.

WHAT IS A DESTINATION MARKETING ORGANIZATION?

A destination marketing organization (DMO) is an organization that is expressly
concerned with promoting a destination to tourists, businesses, investors and others. In
many ways, DMOs and DMCs are similar, in that they are made up of a number of
stakeholders who all have a vested interest in the destination successfully appealing to
travellers.

Since the tourists are at the destination since they arrive till they leave, the
destinations contribute major portion of enhancing tourism experience. Right from
hospitality to a wide range of services, the provision of excellent experience to the visitors is
worked out by united effort of many organizations. DMO is a collaboration of multiple private
and public sector organizations working together towards a common goal, to promote and
market the destination, and to retain its tourism value all the time.

OBJECTIVES OF DMO
The objectives of DMO are as follows:

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 To steer destination development.
To increase tourism influx.
To spread the benefits of tourism.
To reduce tourism impacts on environment and local culture.
To promote and market the country ultimately for tourism.

The main purpose of a destination marketing organization is to create a broader

marketing strategy, which helps to set your destination apart from the main alternatives.
This may involve, for example, identifying unique selling points and highlighting them,
advertising online and offline, collaborating with influencers, and branding the destination.

HOW CAN A DMO HELP WITH DESTINATION MANAGEMENT?

A key part of destination management involves getting the most out of the
local tourism industry and a destination marketing organization can assist with this by
increasing demand to travel to your destination in the first place. This is achieved by creating
a comprehensive destination marketing strategy.

In addition to promoting the destination, a DMO can provide potential travellers with
valuable information, direct travellers to hotels and other forms of accommodation, provide
access to booking platforms and help tourists to plan their itinerary. They can also work with
a DMC, in order to promote the right aspects of the destination, at the right time, to the right
demographic, in order to ensure tourists are adding value to your destination.

DESTINATION MARKETING STRATEGIES

Destination marketing goes hand-in-hand with a destination management strategy,
highlighting to potential travellers the unique selling points and experiences your
destination has to offer them.

Destination management can go a long way towards making sure tourism adds real
value to a destination. By focusing on the ideas of place, people, product and process, it
becomes easier to consider the interests of all stakeholders, adopt a holistic approach,
promote your destination and come up with a coherent management strategy.

DMO PARTNERSHIPS
The DMO partners with various other organizations as:
Accommodation providers who provide serviced and non-serviced accommodations
such as hotels, bed and breakfast, self-catering establishments, holiday caravans, and
camping sites.

33
 Attraction managers who provide maintenance of attractions, museums, galleries,
countryside sites, boat trips, and walking tours.
Food and beverage providers such as restaurants, pubs, and cafes.
Retail outlets such as specialty and independent shops, and shopping centers.
Transport operators such as surface and air transport providers.
Public sector organizations such as state services for availing licenses and
permissions.

CHARACTERISTICS OF DMO
Some common characteristics of a DMO are:
It is an independent, non-profit organization.
It is a membership-based organization comprising public, private, non-profit, and
academic tourism stakeholders from the region.
It is governed by a board of directors.
It has diverse set of revenue generation from membership fees, hotel taxes, retail
opportunities, online booking commissions, advertising in publications and websites.
It provides services mostly at zero cost to the end users.

HOW DMO WORKS?

The DMO is completely aware that the experience of the tourists directly drives the
economy. It works with all its capabilities to manage the destination by:
Establishing a regular communication with the industry through newsletters,
business opinion surveys, marketing opportunities, and annual reports.
Conducting annual forums to discuss the progress and plans of destination
management.
Conducting topic-specific workshops to discuss key issues.
Getting feedback on the progress.

34
 Conducting regular periodic meetings with participating businesses.
Organizing festivals, lectures, talks, theme holidays, and events.

TOOLS FOR DESTINATION MANAGEMENT

A number of management tools can be used in Destination Management:

System of Measuring Excellence for Destinations (SMED)

The destination development starts with hiring any UNWTO affiliate organization to
research and come out with the findings about the situation at the destination and its
surroundings. The hired agency conducts observations, surveys, readings, and
interviews of the area and generates reports of the findings. SMED also recommends the
necessary developments and prospective income opportunities at the destination.

Using Scientific Research

Experts conduct scientific research at the destinations and contribute their findings
which can be a great aid to develop destination by protecting the ecosystem of various
places. For example, banning fishing in some marine area, banning the entry in some
reserves to protect and conserve flora and fauna.

Monitoring the Destination

The UNWTO conducts annual surveys of businesses, residents, foreign tourists, and
domestic tourists, about their experience and expectations at the destination. It also
takes inputs from local residents and generates reports. The reports then help the local
leaders identify and resolve the problems.

Public Use Plans (PUP)

The information recorded in the reports is then uses to create a Public Use Plan (PUP) for
the destination. A PUP proposes how to manage the torrent of tourists effectively by
considering the volume of traffic, entry fees, protection of sensitive areas, housekeeping
efforts and cost of maintaining the sites, and so on.

STEPS OF DESTINATION DEVELOPMENT

The following steps are observed while developing a destination:

Develop a Vision for the Destination

A vision is an exciting picture of a destination’s desired futures. The vision is intended
to motivate stakeholders to work together to achieve these futures. Vision brings all the
stakeholders together and creates an integrated vision of all the individual visions of the
stakeholders.

35
 The vision works to find a common ground in which each stakeholder plans a part of
their future. Tourism visions describe the style of tourism the destination would like to be
recognized for such as ecotourism, culinary, cruise port, or any other, and the target market
for the destination.

Here are some questions to ask during the visioning:

How do you see your destination after tourism development?
What do you want to see happen at the destination?
How much of what type

It is then followed by destination-wide meeting, gathering the local responses, and drafting
the vision as a mean to start the work of destination development.

Set the Goals for Tourism Development

Set economic, socio-cultural, and environmental goals. Goals are realistic, measurable
targets for the destination’s tourism vision. Tach goal goes hand in hand with the vision.
While setting the practical goals, the following answers are found out:
How many inbound tourists does the destination want to attract?
How many jobs, for whom, at what pay scales, and for what seasons?
What is the anticipated percentage increase of income for local residents?
How many tourists are too many?

The stakeholders identify the practical aspects of goals, timelines, and the actions needed to
perform to achieve each goal.

Collect Visitors’ Experience

The tourists’ experience can be divided into four phases:
Dreaming of travel: Anticipating holidays or breaks and finding out information of
dreamed destination, Fix the range of destinations.

Choosing the destination: It takes place under the influence of cost, climate, first-
hand information, internet, and amenities at the destination.
Visiting the destination: Experiencing the place and Forming of opinions,
perception about the destination. Generating the feelings of
satisfaction/dissatisfaction.
Post-tour phase: The visitors share pictures and experiences with relatives and
friends, recommend to visit or not to visit the destination.

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Compile a Visitor Survey
A survey of visitors is then compiled by collecting their profile data through
questionnaires. The particular visitors make market segment. The visitor profiles are created
by recording the following information about visitors:
Type of visitor
Demographics (age, mode of travel, group size, nationality)
Psychographics (values, benefits, desired experience, beliefs, perception about the
destination)
Spending patterns (daily expenditures, types of purchases made, form of payment,
duration of stay)

Establish a Destination Management System

The responsibility of creating a Destination Management System (DMS) is that of the
destination managers. A DMS is a database for collecting, manipulating, and distributing the
recorded information. It includes the following information:
Supply inventory and performance of hotels, tour operators, attractions, restaurants,
etc.
Events, festivals, activities, shopping, cycle routes, beautiful spots.
Visitor profiles.
Resident survey results.
Social, economic, and environmental impacts.

The DMS organizes the information to facilitate all the stakeholders of tourism to
make their presence felt on the Internet. It also enables the destination and tourism
businesses offer dynamic tour packages. DMS help DMOs by using Content Management
System (CMS) to support the presence of DMO on web and social media.

Market the Destination on the Internet

In present times, people have indisputable accessibility to information on various
websites. It is very important to for a tourist destination to mark its presence on the internet.
Easy to navigate, clear website with high quality photographs of the destination and simple
yet exceptional content can market any tourist destination effectively. By visiting these E-
destinations, the tourists get a fair idea about what to expect and what they are going to
experience.

Brand the Destination

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 Destination branding is nothing but describing the visitors’ experience in terms of
facilities, amenities, attractions, activities, and other resources to the people to turn them
into the tourists.
A strong destination brand creates an image about the destination, modifies peoples’
perception about a place, influences decision-making, and delivers a memorable experience.

UNIT III – ACTIVITIES

Identification.
1. Can be a city, town, or other area. It is dependent on the revenues accruing from
tourism. It is marketed or markets itself as a place for tourists to visit. It may contain
more than one tourist attractions.
2. It is a place where the tourists can avail food and shelter on payment.
3. It is the most common type of tourist destination, where tourists spend most of their
time on occasional excursions to nearby places of attraction.
4. It refers to that type of destination where tourists need to travel and explore
surrounding region.
5. An organization that is expressly concerned with promoting a destination to tourists,
businesses, investors and others.

Unit Discussion.
1. What is destination management and why is it important?
2. Explain the different tools for destination management.

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 UNIT IV – THE PHILIPPINE TOURISM INDUSTRY

LEARNING OUTCOMES:
1. Role and Responsibility of DOT
2. Duties and responsibilities of tourism in the Philippines
3. Understand the different government agencies and tourism organizations

WHAT IS THE MANDATE OF THE DEPARTMENT OF TOURISM (DOT)?

The DOT is the primary planning, programming, coordinating, implementing and regulatory
government agency in the development and promotion of the tourism industry, both
domestic and international, in coordination with attached agencies and other government
instrumentalities. It shall instill in the Filipino the industry’s fundamental importance in the
generation of employment, investment and foreign exchange.

The primary government agency charged with the responsibility to

– encourage, promote, and develop tourism as a major socioeconomic activity
– generate foreign currency and employment
– spread the benefits of tourism to a wider segment of the population
– assure the safe, convenient, enjoyable stay and travel of foreign and local tourists
in the country

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WHAT ARE SOME OF DOT’S POWERS AND FUNCTIONS?
The DOT shall prepare a market development program to attract people to visit the
Philippines and enhance the prestige of the country and the Filipino people in the
international community. It shall also represent the government in all domestic and
international conferences and fora, and in all multilateral or bilateral treaties and
international agreements concerning tourism.

WHAT IS THE STRUCTURE OF DOT?

The DOT shall consist of the Department Proper (Offices of the Secretary, Undersecretaries
and Assistant Secretaries), Department Offices, Services and Unit, and the Regional and
Foreign Offices. The Department Offices are:

1. Office of Product Development. – Functions include the conceptualization and

development of new products which will enhance tourism sites and facilities, and
encouraging joint undertakings with the private sector for the development of new
tourism-related products and programs.
2. Office of Tourism Development Planning, Research and Information Management. –
Tasked with the preparation, formulation monitoring and evaluation of policies, plans
and programs of the DOT, including the National Tourism Development Plan. It is also
tasked with sourcing of grants or loans from local and foreign funding institutions to
implement tourism policies, plans and projects, as well as pursuing DOT’s interests in
multilateral, international, and regional tourism cooperation, agreements and treaties.
3. Office of Industry Manpower Development. – It is tasked, among others, of conducting
seminars on Philippine history, culture, environment and related subjects, in
coordination with appropriate government agencies and the private sector, as well as
encouraging the development of training courses and apprenticeship programs for
tourist guides and other similar workers jointly with concerned tourism enterprises,
appropriate government agencies and the private sector.
4. Office of Tourism Standards and Regulations. – Tasked with formulating and enforcing
internationally competitive standards of facilities and services.

40
5. Office of Tourism Coordination. – Tasked to increase linkages between various
government offices and the private sector and among the various entities in the private
sector itself to properly implement tourism policy, including the function of supporting
the private sector in all tourism activities requiring governmental coordination.
6. Office of Tourism Resource Generation. – This office is tasked with the collection of
necessary fees and charges which shall be used by the DOT in the promotion and
marketing efforts of the Tourism Promotions Board (TPB ) and the development of
infrastructure facilities, utilities and services of the Tourism Infrastructure and
Enterprise Zone Authority (TIEZA). The proceeds of such collection shall accrue directly
and automatically to the DOT.

WHAT IS THE TOURISM DEVELOPMENT FUND?

This is a special fund created under this law, to be disbursed and administered by the DOT.
It shall be used for the development, promotion and marketing of tourism and other projects
of the DOT that will boost tourism in the country. The Fund shall be sourced from the fees
and charges which will be collected by the DOT. A special account shall be established for
this Fund in the National Treasury.
WHAT AGENCIES AND CORPORATIONS ARE ATTACHED TO THE DOT?
The following shall be attached to the DOT and shall be under the supervision of the
Secretary for program and policy coordination:

1. Tourism Promotions Board (TPB)

TPB, formerly Philippine Convention and Visitors Corporation (PCVC), is a corporate
body created under RA No. 9593, which shall have an authorized capital of P250
million fully subscribed by the National Government
It is under the supervision of the DOT Secretary and attached to the DOT for purposes
of program and policy coordination
TPB shall formulate and implement an integrated domestic and international
promotions and marketing program for DOT
2. Tourism Infrastructure and Enterprise Zone Authority (TIEZA)
TIEZA, formerly known as Philippine Tourism Authority (PTA), is a corporate body
tasked to designate, regulate, and supervise the Tourism Enterprise Zones (TEZs) as
well as develop, manage, and supervise tourism infrastructure projects in one country,
with the primary objective of encouraging investment in TEZs

3. Duty-Free Philippines Corporation (DFPC)

It shall be a body corporate to operate the duty-and tax-free merchandising system in
the Philippines to augment the service facilities for tourists and to generate foreign

41
 exchange and revenue for the government. The Duty Free Philippines shall be
reorganized to become the DFPC.

4. Intramuros Administration (IA)

Established in 1979 by virtue of Presidential Decree (PD) No. 1616 signed by
President Ferdinand Marcos on April 10, 1979
Responsible for the orderly restoration and development of Intramuros as a
monument to the Hispanic period of our history; it shall ensure that the general
appearance of Intramuros shall conform to Philippine-Spanish architecture of the
16th to 19th century

5. National Parks Development Committee (NPDC)

A government agency that is tasked to oversee national parks in the Philippines
It was established primarily for the purpose of developing and maintaining national
parks specifically the Rizal Park or Luneta, Paco Park, the Pook ni Maria Makiling, and
Burnhan Park
Established on January 14, 1963 by Executive Order No. 30 for the development of
the Quezon Memorial Circle, Luneta, and other National Parks
To provide fully developed and well maintained parks for the Filipinos’ wholesome
recreation and sociocultural education

6. Nayong Pilipino Foundation (NPF)

The NPF was attached to the DOT in 1991 by virtue of E.O. No. 497
The only tourist complex showcasing the many primary attractions and scenic places
in the Philippines
It is a major administrative and operational concern of the agency to keep its facilities
and surrounding in the best condition

7. Philippine Retirement Authority (PRA)

The Philippine Retirement Authority (PRA) is a government owned and controlled
corporation created by virtue of Executive Order No. 1037, signed by former President
Ferdinand E. Marcos on 04 July 1985. On 31 August 2001, through Executive Order
No. 26, the control and supervision of PRA was transferred to the Board of
Investments (BOI) – Department of Trade and Industry from the Office of the
President.
On 12 May 2009, Republic Act No. 9593, otherwise known as Tourism Act of 2009,
PRA became an attached agency of the Department of Tourism and placed under the
supervision of the Secretary.

42
 PRA is mandated to develop and promote the Philippines as retirement haven as a
means of accelerating the social and economic development of the country,
strengthening its foreign exchange position at the same time providing further best
quality of life to the targeted retirees in a most attractive package.

8. Philippine Commission on Sports Scuba Diving

Undertake measures to provide the standard basic dive rules to all levels or kinds of
divers, regulate scuba sports and technical diving in the country and ensure the safety
of the sport through the formulation of policies pursuant thereto, in coordination with
the Office of Tourism Standards and Regulations, including the regulation of the
accredited scuba sports and technical diving establishments.

TOURISM INFRASTRUCTURE PROGRAM

The DOT, in accordance with the National Tourism Development Plan and local
government initiatives, shall coordinate with the Department of Public Works and Highways
(DPWH) and the Department of Transportation and Communications (DOTC) in the
establishment of a tourism infrastructure program in the respective work programs of said
agencies, identifying therein vital access roads, airports, seaports and other infrastructure
requirement in identified tourism areas. The said agencies and the Department of Budget
and Management (DBM) shall accord priority status to the funding of this tourism
infrastructure program.

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 UNIT IV – ACTIVITIES

Identification
1. Functions include the conceptualization and development of new products which will
enhance tourism sites and facilities, and encouraging joint undertakings with the
private sector for the development of new tourism-related products and programs.
2. Tasked to increase linkages between various government offices and the private
sector and among the various entities in the private sector itself to properly
implement tourism policy, including the function of supporting the private sector in
all tourism activities requiring governmental coordination.
3. Formerly Philippine Convention and Visitors Corporation (PCVC).
4. Formerly known as Philippine Tourism Authority (PTA), is a corporate body tasked
to designate, regulate, and supervise the Tourism Enterprise Zones (TEZs) as well as
develop, manage, and supervise tourism infrastructure projects in one country, with
the primary objective of encouraging investment in TEZs.
5. It shall be a body corporate to operate the duty-and tax-free merchandising system
in the Philippines to augment the service facilities for tourists and to generate foreign
exchange and revenue for the government.
6. Mandated to develop and promote the Philippines as retirement haven as a means of
accelerating the social and economic development of the country, strengthening its

44
 foreign exchange position at the same time providing further best quality of life to the
targeted retirees in a most attractive package.
7. NPDC.
8. NPF.
9. IA.
10. DOT.

Unit Discussions.
1. Explain the role and responsibility of the Department of Tourism.

UNIT V – TRAVEL AGENCIES

LEARNING OUTCOMES:
1. Role, Functions and Responsibilities of TA & TO
2. Ticketing- Fare Calculation- Documentation- Packaging Tour
3. Foreign Exchange
4. Travel Documentations
5. Know the current trends in online and retail operations of travel business
6. Role and importance of travel agency

Tour operator is a far from easy process because their role, activities and form have
changed dramatically from the early days when Thomas Cook first organized a package trip
by rail in the 1840s. One useful approach is to identify what a tour operator does as a means
of establishing their characteristics and form. In simple terms a tour operator will organize,
package together different elements of the tourism experience (as shown in Figure 8.1) and
offer them for sale to the public either through the medium of a brochure, leaflet or
advertisement, or using ICT. If a tour operator is to offer a package, also known as an
inclusive tour, it will normally have to include at least two elements that are offered for sale

45
at the inclusive sale price, and will involve a stay of more than 24 hours in overnight
accommodation. These elements normally include transport, accommodation and other
tourist services

AGENT
An agent is a person acting for, or employed by, the principal. If a company appoints
another person to act for it in the course of business, that person becomes the agent, whether
the appointment is full-time or part-time and whether or not the agent receives a fixed salary
or a fee from the company. In a travel agent, any individual director or employee or a self-
employed person acting for the travel agent is an agent of the company.

A travel agency is a private retailer or public service that provides tourism related
services to the public on behalf of suppliers such as airlines, car rentals, cruise lines, hotels,
railways, and package tours. In addition to dealing with ordinary tourists most travel
agencies have a separate department devoted to making travel arrangements for business
travelers and some travel agencies specialize in commercial and business travel only. There
are also travel agencies that serve as general sales agents for foreign travel companies,
allowing them to have offices in countries other than where their headquarters are located.

ORIGINS OF TRAVEL AGENCY

The British company Cox & Kings is sometimes said to be the oldest travel agency in
the world, but this rests upon the services that the original bank, established in 1758,
supplied to its wealthy clients. The modern travel agency first appeared in the second half of
the 19th century. Thomas Cook, in addition to developing the package tour, established a
chain of agencies in the last quarter of the 19th century, in association with the Midland
Railway.

They not only sold their own tours to the public, but in addition, represented other
tour companies. Other British pioneer travel agencies were Dean & Dawson, the Polytechnic
Touring Association and the Co-operative Wholesale Society. The oldest travel agency in
North America is Brownell Travel; on July 4, 1887, Walter T. Brownell led ten travelers on a
European tour, setting sail from New York on the SS Devonia.

Travel agencies became more commonplace with the development of commercial

aviation, starting in the 1920s. Originally, travel agencies largely catered to middle and upper
class customers, but the post-war boom in mass-market package holidays resulted in travel
agencies on the main streets of most British towns, catering to a working-class clientele,
looking for a convenient way to book overseas beach holidays.

46
OPERATIONS OF TRAVEL AGENCY
A travel agency's main function is to act as an agent, selling travel products and
services on behalf of a supplier. Consequently, unlike other retail businesses, they do not
keep a stock in hand. A package holiday or a ticket is not purchased from a supplier unless a
customer requests that purchase. The holiday or ticket is supplied to them at a discount. The
profit is therefore the difference between the advertised price which the customer pays and
the discounted price at which it is supplied to the agent. This is known as the commission. In
many countries, all individuals or companies that sell tickets are required to be licensed as a
travel agent. In some countries, airlines have stopped giving commission to travel agencies.
Therefore, travel agencies are now forced to charge a percentage premium or a standard flat
fee, per sale. However, some companies still give them a set percentage for selling their
product. Major tour companies can afford to do this, because if they were to sell a thousand
trips at a cheaper rate, they still come out better than if they sell a hundred trips at a higher
rate. This process benefits both parties. It is also cheaper to offer commissions to travel
agents rather than engage in advertising and distribution campaigns without using agents.

Other commercial operations are undertaken, especially by the larger chains. These
can include the sale of in-house insurance, travel guide books and timetables, car rentals, and
the services of an on-site Bureau de change, dealing in the most popular holiday currencies.

The majority of travel agents have felt the need to protect themselves and their clients
against the possibilities of commercial failure, either their own or a supplier's. They will
advertise the fact that they are surety bonded, meaning in the case of a failure, the customers
are guaranteed either an equivalent holiday to that which they have lost or if they prefer, a
refund. Many British and American agencies and tour operators are bonded with the
International Air Transport Association (IATA), for those who issue air tickets, Air Travel
Organisers' Licensing (ATOL) for those who order tickets in, the Association of British Travel
Agents (ABTA) or the American Society of Travel Agents (ASTA), for those who sell package
holidays on behalf of a tour company.

A travel agent is supposed to offer impartial travel advice to the customer. However,
this function almost disappeared with the mass-market package holiday and some agency
chains seemed to develop a 'holiday supermarket' concept, in which customers choose their
holiday from brochures on racks and then book it from a counter. Again, a variety of social
and economic changes have now contrived to bring this aspect to the fore once more,
particularly with the advent of multiple, no-frills, low-cost airlines.

ORGANIZATION OF TRAVEL AGENTS

47
 Whilst the businesses in this sector can be broadly split into the independent travel
agencies and the multiples who are owned and operated by tour operators and other tourism
concerns, two basic principles characterize success in each: good quality customer service
and management. In terms of management, controlling costs, ensuring highly motivated staff
are employed and building upon a customer base through word of mouth are all critical. The
independent agencies, which are manager-owned and typically employ fewer than five staff,
contrast with the larger chain agencies, located in prominent high street or shopping mall
locations, which have high passer-by traffic. Travel agents typically deal with a diverse range
of tasks including:
making reservations
planning itineraries (including complex round-the-world travel)
calculating fares and charges
producing tickets advising clients on destinations, resorts, airline companies and a
wide range of travel products
communicating with clients verbally and in writing
maintaining accurate records on reservations
ensuring racks are stocked well or supplies are kept in-house
acting as intermediaries where customer complaints occur.

Not only do travel agency staff need technical skills in reading timetables, calculating
fares and an ability to write tickets, they also need good interpersonal skills in closing a sale
and in being able to use technology (e.g. CRS). Agents also need to be able to explain the
growing complexity of air fares and the conditions attached to them in simple, plain English.
An agency manager will have to be able to manage a group of staff and will also be engaged
in the financial management of accounts and cash flow, the invoicing of clients and the
controlling of expenditure in running the business. Above all, it is critical to ensure all staff
provide a high level of customer service so as to make sales and build the client base. To do
this:
customers must be greeted warmly, typically with a smile
staff must ensure high standards of dress, appearance and personal grooming as
customers are influenced by first impressions; their personal posture, manner and
body language are also important as being alert, attentive and willing to empathize
and match client needs with available products is key
all staff must be polite and able to express themselves clearly, while always
maintaining eye contact
telephones must be answered promptly and courteously.

The agent has a critical role to play, not necessarily in providing definitive answers,
but in guiding the consumer, presenting options (and in managing their dismissal) until a

48
suitable product is located. It is clear that this is a time-intensive undertaking and, therefore,
it is apparent why many consumers will go through this process using technology such as
the worldwide web as well as using a travel agency.

COMMISSIONS
Several areas of a travel agency’s focus pay commissions to the agency which
becomes its principal income. These are mainly car rentals, cruise lines, hotels, railways,
sightseeing tours, tour operators, etc. A fixed percentage of the main element of the price is
paid to the agent as a commission. Commissions are not paid on the Tax component of the
price.

However regarding air travel, commissions are becoming a thing of the past. In the
United States, most airlines pay no commission at all to travel agencies. In this case, an
agency usually adds a service fee to the net price. Reduced commissions have taken place
since 1995, when first commission reductions hit North America: a cap of $50 on return trips
and $25 on one way. In 1999 European airlines began eliminating or reducing commissions,
while Singapore Airlines did so in parts of Asia. In 2002 Delta Air Lines announced a zero
commission base for USA and Canada; after a few months United Airlines, American Airlines,
Continental Airlines, Northwest Airlines, US Airways and American Trans Air joined Delta.

TYPES OF AGENCIES
There are three different types of agencies in the UK: multiples, miniples and
independent agencies. The former comprises a number of national chains, often owned by
international conglomerates, like Thomson Holidays, now a subsidiary of TUI AG, the
German multinational. It is now quite common for the large mass-market tour companies to
purchase a controlling interest in a chain of travel agencies, in order to control the
distribution of their product. (This is an example of vertical integration.) The smaller chains
are often based in particular regions or districts.

In the United States, there are four different types of agencies: mega, regional,
consortium and independent agencies. American Express and the American Automobile
Association (AAA) are examples of mega travel agencies. Independent agencies usually cater
to a special or niche market, such as the needs of residents in an upmarket commuter town
or suburb or a particular group interested in a similar activity, such as sporting events, like
football, golf or tennis.

There are two approaches of travel agencies. One is the traditional, multi-destination,
out-bound travel agency, based in the originating location of the traveler and the other is the
destination focused, in-bound travel agency, that is based in the destination and delivers an

49
expertise on that location. At present, the former is usually a larger operator like Thomas
Cook, while the latter is often a smaller, independent operator.

TRAVEL AGENCIES IN THE 21ST CENTURY

With general public access to the Internet, many airlines and other travel companies
began to sell directly to passengers. As a consequence, airlines no longer needed to pay the
commissions to travel agents on each ticket sold. Since 1997, travel agencies have gradually
been disintermediated, by the reduction in costs caused by removing layers from the
package holiday distribution network. However, travel agents remain dominant in some
areas such as cruise vacations where they represent 77% of bookings and 73% of packaged
travel. In 2009, the market size for travel agencies experienced a sharp decline, dropping
from $17 billion the previous year to $14.5 billion.

In response, travel agencies have developed an internet presence of their own by

creating travel websites, with detailed information and online booking capabilities. Major
online travel agencies include: Expedia, Voyages-sncf.com, Travelocity, Orbitz, CheapTickets,
Priceline, CheapOair, Webjet, and Hotwire.com. Travel agencies also use the services of the
major computer reservations systems companies, also known as Global Distribution Systems
(GDS), including: SABRE, Amadeus CRS, Galileo CRS and Worldspan, which is a subsidiary of
Travelport, allowing them to book and sell airline tickets, hotels, car rentals and other travel
related services. Some online travel websites allow visitors to compare hotel and flight rates
with multiple companies for free. They often allow visitors to sort the travel packages by
amenities, price, and proximity to a city or landmark.

Travel agents have applied dynamic packaging tools to provide fully bonded (full
financial protection) travel at prices equal to or lower than a member of the public can book
online. As such, the agencies' financial assets are protected in addition to professional travel
agency advice.
All travel sites that sell hotels online work together with GDS, suppliers and hotels directly
to search for room inventory. Once the travel site sells a hotel, the site will try to get a
confirmation for this hotel. Once confirmed or not, the customer is contacted with the result.

This means that booking a hotel on a travel website will not necessarily result in an
instant answer. Only some hotels on a travel website can be confirmed instantly (which is
normally marked as such on each site). As different travel websites work with different
suppliers together, each site has different hotels that it can confirm instantly. Some examples
of such online travel websites that sell hotel rooms are Expedia, Orbitz and WorldHotel-Link.

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 UNIT V – ACTIVITIES

Unit Discussion.
1. Discuss what an agent is.
2. Explain the operations of a travel agency.
3. What are the task that a travel agent typically deals with?
4. Describe travel agencies in the 21st Century.

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 UNIT VI – TOUR PACKAGING AND PROGRAMMING

LEARNING OUTCOMES:
1. Meaning and Classifications of Tour Packages
2. Components of Package
3. Advantages and disadvantages
4. Customized and Tailor-Made Package
5. Tour Formulation & Designing Process
6. Tour Brochure Designing

Packaging tours is an innovative business concept that has gained worldwide

visibility since it was first introduced in the mid of nineteenth century. Assembling basic and
desirable services and offering them in one price is the primary function of package tour
business. This serves two important purposes: First, it is to reduce the unwanted hassles for
the customers and provide value-for-money services and second, it is to give business
opportunities to the travel agents, tour operators, transport operators, accommodation
service providers, event companies, etc. Thus, a package tour is a sum total of services
consisting of transport from the point of origin to all traversing destinations,

52
accommodations at en route places and at the destination, other recreational and travel
services. This unit will explain the meaning and types of tour packages, components of
organized package tours, and process of designing packages, tour brochure designing and
programming the package tour.

MEANING AND CLASSIFICATIONS OF TOUR PACKAGES

The package tour business was planned and organized after the conduct of organized
package tour to Paris in 1855 by Thomas Cook’s. Package holidays can be escorted or
unescorted given the needs and demands of customers. A package tour comprises a
combination of two or more components of services with an objective of helping the clients
or customers save time & cost and avoid uncertainties. It largely includes the services of
transport, accommodation, food, guide and other miscellaneous services. Moreover,
transport and accommodation form a significant proportion of the cost and service of any
organized package tour.

These services are offered at inclusive prices and customers primarily prefer to pay a
single price at one place as it is convenient for the high-end customers. Thus, pre-arranged
services are selected to be incorporated in the package on the basis of the quality of services
and good will of the service providers. In addition, the design of package tour is done taking
the travel trends and motivation into consideration. Hence, tour operators evolve strategies
to increase the perceived value by combining complimentary products and services in more
attractive ways. Increasing the value and demand for a tourism product through packaging
and partnership is the ultimate objective of the tour operation business.

CLASSIFICATION OF PACKAGE TOURS

The tour operator is a consolidator or wholesaler in assembling primary and related
services with a different price tag. However, packages are designed for the independent and
group tours after making comprehensive study and analysis. Broadly, all these package tours
provide a bundle of services to the customers who are generally leisure and business
tourists. The classification is made on the basis of the operation and types of services. Given
the nature of package tour business, it may be named as group tour, individual tour,
sponsored tour, special interest tour and common interest tour, guided tour, and escorted
tour. Package tours are basically classified as independent tour, escorted tour, hosted tour
and incentive tour.

Escorted Tour: An escorted tour is accompanied by qualified, trained and

experienced tour managers or guides, who provide information and assistance to the
group at the origin, en-route and the destinations about flight boarding, and baggage
handling, hotel check-in, meal arrangements along with interpretation about the
places of tourist importance during sightseeing. Tour escorts provide timely

53
 assistance and advice about the seating arrangements in flights, trains, and
sightseeing coaches. For example, the affinity group package comprises the members
of a community club to travel together.
Independent Tour: A package tour is designed for independent tourists or free
independent travelers. They are very much particular about selecting types of
destinations, accommodation, and transportation as it suits the budget, comfort and
time. Each individual element of service is purchased or a combination of components
services is included in package. The independent tour largely includes domestic air
tickets, hotel room services, processing of travel formalities, arrival, and departure
transfer, and sightseeing. Other services include adventure sports, cultural events,
and health related activities that generally enhance value of the independent tour.
The cost of the package tour is relatively high as it includes most of the customized
services. For example, the high-end or budget travelers prefer independent tours.
Hosted Tour: A hosted tour is handled by the ground operator or destination
management agency as an representative of wholesale tour operator for making
ground services like cab, coach, guide, confirmation of hotel rooms, tool taxes, entry
tickets, etc as per the contract. A hosted tour is one where the local ground operator
becomes the host to receive the guests at the destination. This is a type of tour that
brings in the concept of host-guest relationship that leads to demonstrating the local
culture and heritage to the guests. It provides a traditional reception upon the arrivals
of guests at the airports or railways stations.
Incentivized Tour: Incentivized Tour is usually all-inclusive package tours that
include all essential components of a standard package tour. It is organized package
tour that is conducted for employees with the sponsorship from the business firms or
corporate houses. It is an incentive or intangible reward for employees given
periodically as per the organization’s policy. For example, Thomas Cook, and SOTC
promote corporate and MICE package tours.
Freedom Tour: Tour is arranged as per the demand of customers. It is a freedom of
customers to select the travel. The selection of places of interest and components of
package tour is decided as per the wish and budget of customers. This type of tour is
designed for the working class people whose budget of expenditure is limited and
their choice of place is largely different from others. There can be small or large
groups with maximum freedom of deciding how, when and where to travel, stay and
halt.

COMPONENTS OF PACKAGE
The elements of a package tour determine the sale of package tour in the travel
market. The tour includes the services that are the sum total cost of related and
complementary services. Tour operators take the services from the airlines, hotels, cruises,

54
railways, ground transport, and event planner. In order to make to package tour more
appealing and attractive, tour wholesalers examine the buying ability of customers and the
cost of components of the package tour, and finally add a profit margin to arrive at the final
price of the package tour. Generally, tour packages are determined by the market demand
and trends and tour companies try to reduce the cost of buying the services through
aggressive negotiations and position the packages at the right time to have the flexibility of
giving price tag. Tour operators assemble components of services to enrich the experience
of tourists.

The following component of services is delivered assembled in package tours. These

are the following elements of package tours.

Accommodation: Accommodation is an important component of package tour and it

constitutes almost one third cost of package. There are primary and supplementary
accommodation service providers. The star hotels, business hotels, resorts and
international hotels are the conventional accommodation operators with the
provision of providing room cum food services. The supplementary accommodation
service providers are lodges, guest houses, bungalows, service apartments, etc. Tour
operators include the services of both the categories depending on the cost of package
tours and affordability of customers.
Sightseeing Tour: Sightseeing is one of the most important elements of a package
tour. It is an integral part of a package tour as it offers conducted tours to the places
of tourist interest in the cities. Tour operators arrange for more activities in the
sightseeing or excursion tours. Each member of the conducted sightseeing tour is
billed in such a manner that the cost of cars or coach services is equally divided among
them.
Airlines: Air travel is an important component in the package tour segment. This
includes international and domestic flight tickets and on-board services. Tour
operators can include the first class, business class, economy class, excursion fare in
the package tour to cater different segments of customers.
Railways: Tour operators include the train travel and other on-board services in
domestic sector. It is an important mode of travel to reach various off-the-beaten-
track destinations as air connectivity is limited in many countries. For example, the
Indrail pass, Eurail Pass, Brital Pass and AMTRAK are booked in advance to provide
alternative and quickest mode of transport and different experience to the visitors.
Car Rental Service: Luxury car service is an important element of package tour as it
is primarily needed at the time of arrival, departure and sightseeing. A wide range of
luxury cars is customized for sightseeing and excursion tours. An annual contract

55
 with flat rate is done for the smooth operation of car rental services. Tour operators
have now adopted the latest technology to make the schedule of cars.
Luxury Coach Service: All the conventional package tours include the luxury coach
services provided it is a group travel. Each tourist coach is customized with elevated
bucket seats, white window glass, micro phone, air conditioning, and refrigerator For
example; the KPN travels provides luxury Volvo coach services for sightseeing and
excursion trips.
Cruise or Ferry Services: Cruise Liners themselves promote the all-inclusive
packages and get it promoted through the wholesale and retail travel agent. They
include room, food, drinks, sightseeing, entertainment, casino, etc on–board. Package
tours also comprise the service of ferry operators so as to provide alternative and safe
conveyance service. For example, the Royal Virgo operates luxury cruise liners for
high-end tourists across the countries.
Event Services: Tour operators take the services the MICE operators for the purpose
of booking venues, food, conference kits, and pre & post-conference sightseeing
programmes. Event management companies appoint tour wholesalers to sell the
packages.
Insurance: Tour packages are insured for compensation to the tour operators or
guests in the event of cancellation. Thus, insurance is included in the package tour.
Health and luggage insurance are included the package tour. For example, Bajaj
Allianz and TATA AIG have customized travel insurance for the foreign outbound
travel for Indian travelers.
Ground Handling Services: Apart from arranging the luxury cars and coaches, the
services of guides and language interpreters, entrance fees and transfer and drop are
also included in the package tour.
Miscellaneous Services: This service includes porter at airports and railway
stations, tips to guides, interpreters and room boys, entrance fees, gifts and welcome
dinners.

CUSTOMIZED OR TAILOR-MADE PACKAGE AND GROUP INCLUSIVE TOURS

Customized or Tailor-made package is designed for the Free Independent Traveler
(FIT) or Group Inclusive Tour (GIT). In most cases, packages are customized with
personalized services for the FIT category of customers. The FITs make free movement of
travel across destinations with the intention of exploring new places and attractions as per
their convenience. The FITs are novelty seekers and can manage in any hostile environment
with basic facilities and amenities. They mentally tune to get adjusted with the facilities as
the exploring new places are the primary activity. These groups consist of a minimum of two
and a maximum of five members and prefer to luxury hotels and resorts or stay in hostels,
government guest houses, and paying guest houses and the bed-and-breakfast scheme or the

56
European Plan (EP) is preferred. Independent tourists generally shy away from the crowded
places and look for exclusivity and privacy. However, FITs can organize the tour on their own
and ask the tour operators for selected services. The business of FIT is operated to reach out
the niche customers as it satisfies the lifestyle and travel behaviour.

The GIT package tours are developed to include the beaten-track destinations and
places of interest are programmed keeping the time, capacity of group members and parking
areas. This type of tour is mostly conducted with fixed itinerary and it is an escorted tour
with much highlight on common interest places. However, group tailor-made packages are
made to satisfy interests and benefits group members. There can be short-haul and long-haul
travel in case of the GIT. The former is meant for the MICE activities and the latter is apt for
the leisure and pleasure activities. Furthermore, group tour packages are relatively cheaper
as compared to the FIT tour packages. There is bulk of sale of hotel rooms, airline seats, and
coach services in group organized package tours. The principal service providers provide
comparatively higher discounts that can be regarded direct profits of tour operators.

TOUR FORMULATION & DESIGNING PROCESS

The business of package tours is not free from risks like season, rising price and socio-
political factors. At the same time, it is a high breakeven business when the socio-political
and economic environment is stable and conducive. Package tour is driven by the quality
services along with competitive prices. In this regard, there requires extensive market
survey to find the demand trends and tour operators accordingly formulate package tours to
cater the market. Thus, methodical tour planning is essentially required to handle the risk
factors and to improve the quality of a package tour. The tour operator assigns the
responsibility of designing and formulating package tour to senior and experienced
executives as the design of package tour makes the business and breaks the business. It helps
in achieving bumper sale in a record time. For example, the World Famous Tour (WFR) of
SOTC and the Duniya Dekho of Cox & Kings have become generic outbound package tour for
Indian customers. These are the following steps in tour design and selection process.

It is a multi-stage process that helps the tour manager develop and formulate a new
package tour. First, the concept of designing a new package tour is taken a solid shape or
form when collective ideas and experiences are consolidated. However, field survey report
is also assessed to understand the salebility and sustainability of package tour. Tour
operators primarily collect the feedback from the guests in a structured questionnaire with
open-ended and close-ended questions. On the basis of recommendations, the area of
operation of new package tour is given final shape subject to the political, economic and
social developments in a particular area. Thus, it is a combination of innovative ideas,
feedback of tour guides and recommendations of guests to develop package tour.

57
 These are the following suggested processes through which package tour may be
designed.
-Initial research on destination and source market clarifies much drawback of package tour
and takes corrective measures for enhancement the quality and appealing of tour.
-A well-structured itinerary is prepared with due considerations to several do’s and do not’s
during the tour.
-Selecting the destination companies and authorizing them with the ground handling
responsibilities.
-Venders of primary and supplementary services are contacted and negotiated to obtain the
best possible quotations.
-Costing of elements of package tours and pricing package tours is done carefully.
-Tour brochure is given final shape once the destination selection, negotiations with vendors
and costing is completed.
-Selling the package tour directly or through the retail travel can be done through a robust
reservation system.
-Marketing and sales promotion helps in reaching the target market.
-Operation of tour is carried out with the help of ground operators.

Besides these broad stages of developing, marketing and operating the package tours,
other processes are implicitly associated in making the formulation and designing process
complete.

Exercise:
1. What are the formulation processes for developing a package tour?
2. Why there is a need for systematic and planned approach for package tour?

TOUR BROCHURE DESIGNING

Tour brochure depicts the places of interest, types of services, nature of operation
and conditions. Information related to the mode of transport, accommodation, and other
related services is clarified in order to avoid ambiguity and confusion. Customers can get
sufficient idea of booking the organized package tours. It is usually written in simple and
lucid language to describe the components of services and places of tourist interest. Tour
operators present the content in the brochure in a simplified form.

The introductory part of the brochure illustrates background and areas of tour
operation. The subsequent pages highlight on the information related to arrivals, departure
and transfer, location of hotel with room services, transport, guide services, sightseeing and
cultural programmes along with suggested places to dine and shop for souvenirs. Do’s and
don’ts are clearly stated to help guide the guests to make the tour more enjoyable and
memorable. Over and above, tour brochure clearly explains the inclusive and exclusive

58
component of services. Images of places of tourist interest, pictures of hotels, transport, and
souvenir shops are placed against the contents to arouse much interest to buy package tour.
In nutshell, a tour brochure generally includes the booking form and booking conditions,
including meal plans and ground services. Overall, these pages contain a wide range of
information that can help the service providers at different points and customers understand
clearly. Brochures are sent to the wholesale and retail travel agents for sales promotion.

TOUR PROGRAMMING AND ITS IMPORTANCE

Each package is embedded with some appealing elements and the programmes or
events are planned in order to provide value-added services. Programming is nothing but an
addition of services without cutting the prime activities of sightseeing or excursion. Tour
operators fine tune itinerary with attractive programmes during the tour that makes the
customers feel of worth buying the packages. When the package tour market is becoming
larger and more buyers are happy to get their vacation arranged with the professional tour
operators, programming increases the quality of package tour that leads to creating repeat
buyers for the package.

Programming comprises activities like learning photography, music, dance, painting,

sculpting, swimming, fishing, surfing, canoeing, rowing, trekking, cooking, cultivating, etc.
Many visitors are interested to learn these activities as a lifetime experience. Tour operators
refer to the local calendars to find the fairs and festivals around the places of tourist interest
and include them in the itinerary.

These are the following advantages of programming from both tour operators and
customer’s point of view.

o It is value for money for the customers.

o It enhances the quality of tour itinerary.
o It arranges the activities as per the needs and traits of customers.
o It is a business opportunities for the tour operators.
o It helps in building branding and positioning.
o It helps in catering the target market.

59
 UNIT VI – ACTIVITIES

Identification.
1. Comprises a combination of two or more components of services with an objective of
helping the clients or customers save time & cost and avoid uncertainties. It largely
includes the services of transport, accommodation, food, guide and other
miscellaneous services.
2. Is a consolidator or wholesaler in assembling primary and related services with a
different price tag.
3. This tour is accompanied by qualified, trained and experienced tour managers or
guides, who provide information and assistance to the group at the origin, en-route
and the destinations.
4. This tour is handled by the ground operator or destination management agency as an
representative of wholesale tour operator for making ground services like cab, coach,
guide, confirmation of hotel rooms, tool taxes, entry tickets, etc as per the contract.
5. Is usually all-inclusive package tours that include all essential components of a
standard package tour. It is organized package tour that is conducted for employees
with the sponsorship from the business firms or corporate houses.

60
 6. This package tour is designed for independent tourists or free independent travelers.
They are very much particular about selecting types of destinations, accommodation,
and transportation as it suits the budget, comfort and time.
7. This tour is arranged as per the demand of customers.
8. FIT.
9. GIT.
10. Depicts the places of interest, types of services, nature of operation and conditions.
Information related to the mode of transport, accommodation, and other related
services is clarified in order to avoid ambiguity and confusion.

Unit Discussion.
1. Discuss the components or elements of a package tour.
2. What are the stages of developing a tour brochure?

Exercise.
1. Design a tour brochure of a local or international destination.

UNIT VII – PACKAGE TOUR COSTING

LEARNING OUTCOMES:
1. Meaning and Types of Cost
2. Concept of Tour Costing
3. Components of Tour Cost
4. Pricing Package Tour
5. Pricing Strategies

Costing the package tour is an important exercise that determines the scale of sale
and margin of profit in a peak and lean season. The actual cost of buying the services is
incurred to acquire the goods and services for production and consumption. Cost is defined
as the total expenditures for acquiring the various components of services from the hotel,
resort, transporter, etc for the tailor-made or ready-made packages. Cost is something that
each tour operating company makes an in-depth survey of the available supplies in the
market and the capability of the suppliers. The reduction of cost can help the tour operator

61
tag a competitive price and it makes the tour wholesaler flexible in keeping profit margin
and discounts for the customers. In a cut-throat competitive market environment, costing
the elements of services included on the package tour needs methodical approach to curtail
unwanted expenditures and increase the salability of tour packages. In this context, this unit
aims to explain the meaning and types of cost, concept of tour costing, components of tour
cost, preparation of cost sheet, tour pricing, calculation of tour price, pricing strategies and
factors influencing the tour costing.

MEANING AND TYPES OF COST

Cost is otherwise explained as the sum total of all expenditures for buying the
principal and ancillary services. Cost is the amount of expenditures that may be actual or
notional incurred on buying services. Cost does not include distribution of capital and
revenue along with certain unexpected value releases. The value release or the acquisition
of economic resources in order to take managerial decisions is called cost. The concept of
cost is measured in monetary terms that the amount of resources is used for the purpose of
value addition. Moreover, cost is the monetary value of resources used for acquisition of
assets and production of outputs. In financial terms, cost is represented as to realize the
objective of a business firms. In the tour operation business, tour wholesaler uses all
knowledge and skills to control the cost and maximize the output. Tour operators incur the
cost of booking the hotel rooms, airline, cruise line seats, railway seats and bus seats and
other primary services.

CONCEPT OF TOUR COSTING

Tour cost is represented as the total cost incurred or attributed to various elements
of package tour. The sum of costs for booking the services is incurred to design the FIT and
GIT tour package. As such, tour operator does not own the primary services of package tour
and it assembles the services in bulk from the accommodation and transport companies.
However, the cost of package tour is determined by the tastes and preferences of customers
and the business strategy to increase the sale of more tour packages. Tour managers easily
find the variable and fixed costs and take appropriate decisions. The method of calculating
the costs largely vary from one tour operating company to other depending on their core
competency and company’s business strategy.

Break-even analysis is one of the key concepts of tour costing. It is the total revenue
generated from the sale of package tour and it must be equal to the total cost incurred for
acquiring the services. This technique is used to evaluate alternative pricing levels. Thus,
break-even sales can be obtained by dividing the sum of the total fixed costs and the total
variable costs by the package prices.

TYPES OF COST

62
 Like any other manufacturing business, tour operation business has two types of cost.
One is variable costs that vary as per the variations of production and the second is fixed
costs that do change in short run, but it varies in the long run as every cost is variable in the
long run. Tour operators generally work out the variable costs and fixed costs along with the
overhead/marketing costs. Variable costs change as per the number of pax in the package
tour. The services that require variable cost include meals, accommodation, entrance fees
and other costs charged at a rate per person. It includes the actual expenses (direct costs) of
rooms, tickets, and other package components incurred with the sale of each package.

The change of fixed costs occurs when the sale of number of packages increases over
a period season. Fixed costs are incurred before acquiring the variable services for the
package tour. These costs often include advertising, pamphlets, brochures, salary, interest
on loan and advances. Thus, fixed costs also include hiring buses and guides or interpreters.
The overhead and marketing costs as part of the variable and fixed costs are included across
the package tours. Thus, there is a variation of between 60 per cent and 70 per cent between
Fixed, variable, and overhead costs in the package tour. Tour operations, after taking all
these costs into considerations, usually add 10-15 per cent mark-up for an individual tour
package.

PREPARATION OF COST SHEET

A cost sheet reflects the cost of each component in the package tour. It requires
continuous efforts for working out the cost estimates in order to find an attractive price that
will increase sale and profit margin. In a typical package tour business, several combinations
of costs are calculated to arrive at a competitive price. Here we may divide the costs of the
elements of services in the package into direct and indirect costs. The direct costs include
administrative cost that includes salary, training, official tours, telephone and internet bills,
rent, electricity, and employee amenities. The indirect cost include advertising, sales
promotion, and publicity. Thus, a tour operator can make a profit of around 15 per cent on
each sale of the package tour that includes the commission or override from the principal
service providers. The component of tour costs is given in Table 1.

63
COMPONENTS OF TOUR COST
The sum total of cost components of a package tour is known as the cost of package sold.
However, the process of ascertaining a package cost becomes complicated, if it not done
which a budget is established. Hence, it is wise to prepare the tour budget before the costing
and pricing and reviewing the cost structure of competitors. The budget is based on the
market research to determine the exact and accurate cost. The projected cost helps the tour
planners to determine and adopt effective pricing strategies. Before the printing of final price
in the promotional brochures and websites, tour wholesalers look into several other variable
costs. Generally, a package tour includes the cost of travel and ground services. Thus, the cost
components of a package tour include:
Research and Product development
Travel cost
Accommodation
Transfer
Food and beverage

64
 Sightseeing and Activity
Marketing & Sales Promotion
Administrative and Investment
Miscellaneous Costs

Research and Product Development: The expenditure on market research is used to

conduct study on the travel behaviour and motivations of customers. It incurs cost to prepare
a survey report. The cost for development of new packages includes the process of planning
and exploring new places of tourist interests.
Travelling and Transfer: International and domestic air fares, rail travel, and transfer and
departure tariffs are also included in the cost component of package tour.
Accommodation: The cost of booking rooms constitutes one third of total cost of package
tour. Tour operators get best possible room rate after negotiations.
Sightseeing & Activity: Tour operators arrange several value-added activities in sightseeing
and excursion tours. The cost of activity is equally divided across the members of group.
Administrative and Technical Cost: This cost is incurred towards the payment of salary,
allowance, incentives, etc. It is also added to the total tour costing. Technical cost
includes the acquisition of new software, hardware and computers for the reservation of
hotel rooms, air, train and bus and ferry tickets.
Training and Development: The cost of training staff is indirectly included in total cost.
Tour operators hire the trainers for in-house training or send the staff and senior managers
to professional institutes.
Marketing and Sales Promotion: Marketing cost includes advertising and sales promotion.
The sales promotion includes discounts, commission and other benefits to the travel agents
and customers.
Printing and Publicity: The cost of printing tour brochures is included in total tour costing.
The cost of foreign promotional tour is included in total cost of package tour.
Payment of Interest: Tour operators incur the cost of payment of interest to the banks on
the investment of capital to run the business.
Depreciation of Assets: Tour operators incur depreciation cost in the long run due to the
obsolete nature of software and hardware, and electronic gadgets.
Miscellaneous Cost: This cost includes porterage charges at airports and railway stations,
tips at hotels or airports, entrance fees, insurance premiums, gifts and welcome dinners.

PRICING PACKAGE TOUR

Tour operator takes lots of precaution for giving a price to the package tour. The
pricing the package depends on the positioning and branding of the product. After examining
the trends, tour operators add their margins and cost of package. Further, the price on the
package is labeled after estimating the operational costs and margin of profit. It is absolutely

65
the freedom of tour operator to price the package. Some of the essential elements of the cost
include mark up, net rate and gross profit. Mark up is the extra amount which the company
can maintain on each sale. Gross profit is the rate at which a supplier quotes for products/
services that it delivers. The commission constitutes a major share of earnings in tour
operations.

PRICING STRATEGIES
Setting pricing for tourism businesses is a strong mix of marketing strategy and
financial analysis. Tourism products are very rarely identical, often because of location, but
also because of the people and the components that make up the experience you provide a
traveler. It can be incredibly diverse and pricing strategies can evolve as a tourism business
develops it’s brand and market share. Even star ratings for accommodation only give a
general guide for travellers on what the pricing will be – there are not set criteria.

There are three types of traditional pricing strategies in tour operation business:

Cost-based Pricing: This type of pricing strategy is used to make over the cost in
order to reach at the breakeven point. It calculates the average cost of each element
of services in the package tour and it adds a markup over and above the average cost
to earn profit. This very common and typical pricing strategy. For example, Thomas
Cook and the Oberio Hotel were used to be known for adopting the cost-based pricing
strategy as there were no competitors to them. In the subsequent time, they moved
to the other pricing strategies like competition and consumer-based pricing.
Competition-based Pricing: This pricing strategy takes tab of the prices of its
competitors in order to tag the price of its own product. Price may be set at the same
price of competitor or it may be a little above or below the price of competitor. Unlike
the package tour market in early nineties, there has been a great change in the pricing
due to the penetration of foreign and domestic tour companies with aggressive
marketing and sales promotion. There is a marginal difference in the price of
outbound package tour of SOTC and Cox & Kings.
Consumer-based Pricing: This is a form of pricing that is primarily set to target
customers by taking the affordability and the quantity of purchase into
considerations. Gone are the days, it was producer dominated market; it is now
consumer-driven and led market. Thus, the inbound, domestic and outbound tour
operators design the package tour taking socio-economic backgrounds of customers.
All package tours are designed after assessing the market.

After from the typical and age-old pricing strategies, these are the following pricing
strategies used in the tour operation business:

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 Rack Rate Pricing: It is full rate before discounts are given. It is generally printed in
the tour brochures for the forthcoming season.
Seasonal Pricing: A wide mix of pricing of package tour is set to cater low, high and
shoulder seasons as tourism is largely driven by the season.
Last Minute Pricing: It is a common method of giving discounts from the daily
quoted prices in order to close bookings. It is put in the flash items in the websites for
last minute booking. In the group travel, tour operators offer some additional services
or discount the prices to get minimum booking to operate the tour.
Per Person Pricing: This type of pricing is set per person or for each category service.
It can be per adult or child or additional person. It can be a taxi at the disposal of
customers.
Per Unit pricing: It is set of price for one unit of package. It may include husband and
wife with children cost free. Sometime, the package includes room, transfer and
sightseeing cost. The room rate generally includes breakfast as per the European Plan
(EP).

UNIT VII – ACTIVITIES

Unit Discussion.
1. Discuss the concept of tour costing and explain its components.
2. What are the three types of traditional pricing strategies in tour operation business?

Exercise.

67
1. Develop a tour itinerary and find out the elements of cost. Present the costs in a
sample cost sheet.

UNIT VIII – TOURISM IMPACTS, TRENDS, AND FUTURE

LEARNING OUTCOMES:
1. Economic impacts of tourism
2. Environmental impacts of tourism
3. Social impacts of tourism
4. Digital technology and new trends in tourism
5. Future of tourism 68
 Tourism is a sector that can contribute to the economic, environmental, and also
social growth of a region or country at large. At the same time, it can also adversely affect
the growth. If the negative outcomes of tourism are not allowed to outweigh the economic
benefits, then it can keep good balance between its beneficial outcomes and investments
made towards tourism. Not all impacts of tourism are overt. They are often indirect and
assessed by the judgement of the observer.

ECONOMIC IMPACTS OF TOURISM

Positive Economic Impacts of Tourism
Inbound tourism helps to generate revenue from foreign shores.
Inbound and domestic tourism create job opportunities.
Inbound and domestic tourism stimulate the development of infrastructure.
It generates opportunities for small scale local businesses.
Negative Economic Impacts of Tourism
Outbound tourism creates economic leakage.
All types of tourism create a sense of dependency on the customer or economic
recession.
It can also promote parallel economies.
The revenue earned from the tourism business seldom is beneficial to the local
population if the destination has accommodation provided by international hotels.

ENVIRONMENTAL IMPACTS OF TOURISM

Positive Impacts of Tourism on Environment
It promotes investment in conservation of natural habitats.
It thus in turn, contributes to the stability of the ecosystem.
In developing countries, it discourages deforestation and over-fishing in large water
bodies.
It contributes to creating awareness of the value of environment for humans.
Positive Impacts of Tourism on Environment
It promotes vandalism and littering.
It makes way for destruction of wild life and vegetation.
It invites air, and water pollution.
It creates a large carbon footprint.
It creates a sense of dependency on the natural resources.

SOCIAL IMPACTS OF TOURISM

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Positive Impacts of Tourism on Society
The infrastructure development also benefits the local population.
It tends to make people aware of the superfluous customs prevailing in the region.
It helps eradicate poverty by promoting the arts and crafts made by people who
search for a source of income.
It fosters a sense of pride among locals.
The bonds among communities are strengthened.
Negative Impacts of Tourism on Society
It impedes the life of local population because of congestion, noise, and pollution.
It can bring problems of alcoholism, drug addiction, and prostitution in the local
society.
To make place for new accommodations or recreational facilities, the locals may be
displaced by acquiring their lands and violating human rights.
It may act as a platform for the spread of contagious diseases.
Tourism can change local community structure, family relationships, collective
traditional life styles, ceremonies and morality.

“No matter why and where you travel. There is always something wonderfully new to be
found.”
- Anonymous.

Tourism is the bundle of tangible products and intangible services that can help to
bring most profound experience one can get. With respect to time, tourism has been
changing from the ancient form of religious tourism to a few new forms. Tourism industry
contributes to 9% of the global GDP and offers one from every 11 jobs. In addition, the
number of tourists have doubled over the past 20 years and a propelling growth is expected
in coming few years among all market segments.

Tourism industry has an intense potential to grow and generate revenues. Let us see,
the new shaping trends in tourism today.

DIGITAL TECHNOLOGY IN TOURISM

Today, tour operators and tourists, both are equipped with latest technology. It has
empowered the tourism business managers and tourists to explore, discover and reach new
places by facilitating online travel and accommodation bookings, and more.

The tourists use various mobile apps as simple as a compass app, online booking apps,
currency converter apps, world time apps, language translation apps, weather apps, google
maps, and restaurant or accommodation locating services on their mobile device. The

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tourists can also add their own data to create overlay on the Google Map and explore all
possibilities in visiting a location by using Google Maps API. Some apps help to plan the tour,
find out cheap flights, local transport hubs, eating joints, and destination attractions.

The apps enhance the tourist experience before, during, and after the tour.

Today, the large tour operators invest finances to create their own mobile apps. They
are inclined to use as less papers as they can and prefer to send pdf documents of itinerary
to their customers and insurance documents to insurance service providing clients. They
also use most of the apps the tourists use; plus, they highly rely on some apps such as
Trafalgar app, Passport to Tour app, mTrip app, which can connect them with the tourists
on the trip, track the itinerary, and get on-the-fly information of the tour.

Since technology is making tour operators reach their customers and clients at the
speed of light, the tour operators use it for promoting their business and various products,
increasing their brand awareness, knowing tourists’ preferences, and providing easy access
to their products and services.

NEW TRENDS IN TOURISM

Tourism is an ever changing industry. A few previously unknown or unnoted forms
of tourism are establishing today. Some of them are:

Polar Tourism
Arctic and Antarctic polar regions have always attracted tourists. Polar tourism is a
dynamically growing industry due to the efforts tour operators take to provide various
attractions, destinations, and activities for their customers. Adventure tourists and common
tourists who long for unique weather experience, solitude, and view of wild life in its natural
habitat opt for polar tourism.

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Space Tourism
It includes orbital and suborbital rocket flights into the space. Riding into the space for
recreation and unique experience was the idea behind this tourism. Till date, only very rich
tourists paying very large sum of money could possibly realize the dream to see beyond the
blue planet. In coming years, this extravagant tourism can be made available for common
people too.

Dark Tourism
Dark tourism is the oldest form of tourism developed recently. Due to the fear and natural
attraction to uncover mystery of death human beings always have, some tourists prefer to
visit the destinations such as battlefields, places of violent homicides, or any places where
large number of people lost their lives naturally or forcefully in the span of last 100 to 125
years.

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For example, tourists visit Pompeii to see the corpses of the victims of the volcanic disaster
literally turned into plaster casts. The volcano on Mt. Vesuvius had destroyed the ancient
town of Pompeii. Though the disaster occurred and claimed thousands of lives long ago, the
threat of more such volcanic eruptions still exist today. Hence, Pompeii is an archeological
and also a dark tourism site.
Some more places the tourists visit for dark tourism are:
Chernobyl and Prypiat, Ukraine: Tourists visit this place to see the ruins of the
nuclear disaster that took place on 26 Apr 1986.
Ground Zero, USA: It is The World Trade Centre site attracting tourists since the
9/11 attacks that took place in 2001.
Auschwitz, Germany: This dark site is famous for Nazi concentration camps with
various rooms piled with thousands of pairs of glasses, shoes, and human hair. It
displays the walls of the corridor exerting the lists of their victims' names and the
dates of their death, and the house of the camp commandant.
Costa Concordia: On the coasts of Tuscany, Italy; the site of this wrecked ship
attracted tourists for around two years.

Voluntourism
It is taking volunteered vacation and touring for charity. People do not just go touring for
recreation and fun but also to serve the community dealing with natural calamities. In case
of flash floods or cyclones, the people in the affected areas need support. Some tourists
voluntarily visit such places and extend their hands for help in whichever possible way they
can. Also, tourists are travelling to care for orphans, for plantation, protecting wildlife, and
similar other tasks.

Luxury Tourism

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It mainly pertains to the rich business tourists, who strongly believe that time is of prime
importance and they must pay to save time at any cost. Wealthy tourists are inclined to
undergo unique experience such as staying at a private island, personal attention from the
service providers and access to elite class attractions and amenities.

Culinary Tourism
The tourists who like to receive local culinary experience, like to tour for this purpose. They
attend food festivals, food competitions, visit local farms, vineries, and cheese manufacturing
companies, interact with local community or cooks for special culinary experience.

BRIC Tourism
The four major developing countries namely Brazil, Russia, India, and China have a great
potential for driving global economy through hospitality and tourism industry. These
countries are important for both inbound and outbound tourism. Global tour operators are
adapting their tourism businesses to exploit the huge market these countries provide.

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Future of Tourism
It is quite obvious that tomorrow’s tourists and tour operators will tend to rely more on
technology. With the introduction of the next generation apps and online services, tourism
is going to get further accessible and enjoyable.

According to Ari Steinbuerg, the founder of a travel startup Vamo, the tourists will
tend to spend less time planning in advance. Efficient booking services and apps will enable
the tourists to create versatile itineraries with reasonable price. Future tourists would not
prefer to be confined to packaged tours. With the availability of large number of options, the
tourists would prefer to realize every possible wish regarding tourism.

With more flight connectivity, travelling modes and accommodations introducing

more comfort, technology helping mankind progressively, the tourism will continue to bring
momentum in its sector.

UNIT VIII – ACTIVITIES

Unit Discussion.
1. Discuss the economic impacts of tourism.
2. Discuss the environmental impacts of tourism.
3. Discuss the social impacts of tourism.

Exercise.
1. Create a poster depicting the impacts of tourism.

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REFERENCES

1. Weaver, D., Lawton L., Tourism Management, Wiley 5th Edition, 2014
2. AK. Bhatia, The Business of Travel Agency & Tour Operations Management,
Sterling Publishers; UK ed. Edition., 2012
3. Goeldner, R & Ritchie. B, Tourism, Principles, Practices and Philosophies, John
Wiley & Sons, London., 2010
4. Roday. S, Biwal. A & Joshi. V., Tourism Operations and Management, Oxford
University Press, New Delhi., 2010
5. Travel Agency and Tour Operations Business - Class –XII (PDF file)
6. Academia.edu, Tracel Agency and Tour Operations Management MBA – Tourism
IV, (PDF file)

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