In large tour operating companies, it is staff employed in the marketing department who are responsible for researching planning and developing the different holiday products, which will be aimed at particular segments of the market. Product Managers will focus on the selection of resorts, choice of accommodation and selection of regional UK departure airports. Segments of the market for which products are developed include:
* Couples without children
* Disabled travellers
* Business travellers
* Youth market
* Elderly travellers
Planning a programme of package holidays
The planning of a programme of package holidays has to be started well in advance of brochure production. Normally a company will start planning between 12 and 18 months before the first expected departure to allow time for contracting beds and seats, production of the brochure and a marketing push. If the purchase of hotels or airlines is involved then planning may have to start as part of an overall corporate strategy two to three years before the actual holidays involved. A summer sun brochure must be ready in the late summer or early autumn of the year preceding the departures, winter sun and winter ski brochures in the preceding summer. Consequently companies have to make critical decisions about prices long before the holidays actually take place, a process, which entails considerable risk.
The first task is to assess the total number of holidays that will be taken during a season by all UK holidaymakers. Having calculated this total market figure, individual Brand Managers or Product Managers decide what share of the market its is realistic to sell (the programme capacity). Having decided on the capacity of the programme, detailed planning on how many holidays should be arranged in each resort and what accommodation and flights are needed can begin.
Marketing staff are also responsible for the key activity of pricing the holidays, which can be very risky advance planning given the necessary before the launch of a programme and the potential for fluctuations in currency exchange rates.
A great deal of background research is undertaken to ensure that the tour operators’ products have the best chance of meeting their sales potential.
* Internal sales data
* External sales data (available from commercial sources)
* Analysis of competitors’ programmes
* Analysis of customer comment questionnaires
* Financial analysis
Staff in the market research department work with marketing department personnel to identify potential new market opportunities, as well as assessing the changing needs and tastes of previous customers. This is achieved by studying sales statistics and market research surveys. They particularly look at the feedback collected from existing customers via CSQs (customer satisfaction questionnaires). The staff try to predict what holidaymakers will want, in terms of which resorts, what type and length of holiday, what standard of accommodation, which departure airports and what price they are prepared to pay.
Deciding on the product
Once a company has been established for a number of years the bulk of its programme will fairly fixed. Unless poor sales or external circumstances force them to abandon a destination they already feature, they will mainly be looking at marginal changes to the programme, bringing in a few new hotels in familiar resorts, a few new resorts in long-established destinations, and perhaps even the odd new destination such changes will usually be highlighted on the front cover of the brochure or in the first few pages.
When deciding to launch a new product, an operator may be influenced by outside factors. For example, in 1993 several operators (including Twickers World and Speedwing) decided to take advantage of a new summer WST charter flight to Eilat to offer summer holidays to Israel, normally thought of as a winter holiday destination from the UK.
If the new resorts slot easily into the general pattern of the operator’s programme, they can expect them to sell without difficulty to a regular clientele.
When it moves away from the usual programme, however it can be very much harder, as eastern bloc specialists Regent Holidays found when they tried to launch programmes to Colombia and Zimbabwe, countries with which they were not associated.
It is easier for larger operators, with their mass-buying clout, to launch unexpected destinations. For example, in 1992 Thomson developed a new programme to Cuba. Although it already had a strong presence in the Caribbean, Cuba’s image sat a little uneasily with its general mass-market image. To set the ball rolling, Thomson offered some excellent start-up offers to Cuba, at loss-leading prices, which it could afford to bear because of its size. Despite some initial sales resistance, Cuba was thought enough of a success to merit inclusion in 1993 brochures too.
In the late 1980s most of the big tour operators launched programmes of the beach holidays in Mexico, it featured mainly as a sightseeing destination in upmarket long-haul brochures. Two resorts were favoured: Acapulco on the Pacific coast and Cancun in the Yucatan on the Caribbean side of the country. There were no direct flights for the UK to Mexico, and many visitors concluded that they has flown halfway round the world for something they could have got more cheaply and conveniently nearer to home. Mexico lapsed from favour until 1993 when Thomson and Airtours made another attempt to crack the market, using new British Airways direct flights into Mexico City and their own charter flights to Cancun. In contrast, in 1993 Thomson decided to drop its two-year old programme of Cuban holidays, which it had found impossible to sell despite a strong presence in other parts of the Caribbean
When final decision has been made- approximately a six months process, we can move on to the next stage, which is putting the 3 main elements – the product the package holiday together accommodation, transport and transfers.
The staff involved in contracting the accommodation and related services have to negotiate on price, quantity and quality, within a very competitive environment .It is likely that other mass market operators, for example, will be using the same hotels in their programmes. An operator may try to negotiate exclusive use of particular accommodation, but this will involve a financial commitment on behalf of the operator that it may not be willing to risk.
1. Commitment – tour operator may agree to buy a specific number of beds for the season regardless of how many it actually manages to sell. The higher the percentage of beds they, make a commitment to in this way, the lower the price the hotelier is likely to accept .In a good year, this can be very profitable. However, in a bad year it may mean the operator paying for lots of beds it is ultimately unable to sell. Although unsold beds are less costly than unsold flight seats, commitment offers little flexibility and is therefore only really appropriate in established resorts with a mass market. Even when an operator does opt for commitment they are unlikely to commit for 100% of their bed requirements.
2. Allocation-Alternatively, a tour operator may agree to an allocation of rooms in hotels, which will put on sale up to a specified date. On the ‘released date’ the rooms revert to the hotelier to fill if still unsold. Although ‘release dates’ are usually three to four weeks before the holiday date. If rooms are required after the release date, the tour operator will have to phone, tax or teletex out to the resort to regain the room. This is a more costly in administrative terms, but less risky than being left with unsold beds.
3. Ad Hoc- tour operators can contract beds as and when they are required by phone, fax or teletex to the resort. Administratively this is the most costly method and involves the client in a wait for confirmation but incurs no risk to the operator.
4. Negotiate with the airlines for charter flights
Because they do not have to operate to a regular schedule, charter airlines can be more flexible than scheduled ones: if a destination is selling poorly, flights can be drooped or consolidated; if one is doing unexpectedly well, the operator will look round for extra charter capacity to contract.
Most tour operators offer ITC packages using charter flights to keep process down. However, customers only really want to fly on charters when there is a significant price differential between them and the scheduled equivalents, which are still thought of as offering better service and standards of comfort. As price margins narrow, so operators are becoming more interested in using scheduled services.
When it comes to contracting the required number of charter seats for their holidays operators have three possible ways of proceeding.
The operator may contract for a ‘time charter’ or ‘whole-plane’ charter whereby they charter whole aircraft for specific times, perhaps for one day a week, or for one season, or for one year.
Some operators will not want to contract for the whole aircraft but will opt for a ‘part charter’ or ‘allocations’ instead. This can be for set days or weeks or for a longer period of time. However the operator will only have responsibility for filling a smaller portion of the aircraft. Even when an operator owns its own airline it may part charter some seats to other operators to reduce the risk the risk of flying with empty seats.
Smaller operators may prefer to buy seats on specific routes on specific dates for a fixed price.
Alternatively they can part charter some seats and buy others on an as hoc basis. As computer technology improves, more and more small operators are opting for ad hoc arrangements which they can make themselves as and when they need to.
5. Negotiation with hotels, transfers services
Although contacting for beds and flights seats is the most important function of a contracting department, contractors will also need to ensure that the right transfers form the airport to the hotels have been arranged, that ‘extras’ like car hire have been organised, and that items like travel bags and baggage labels will all arrive in good time for each departure.
Tour operators hire cars in the resorts by using their bulk-buying muscle to negotiate better rates with big name companies like Avis and Hertz than the clients could get themselves id they waited until they reached the resort to make a booking. More rarely they may make arrangements with cheaper local companies.