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ATAT5001 Airline, Travel Agency And Tour Operations
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ATAT5001 Airline, Travel Agency And Tour Operations
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Course Code: ATAT5001
University: Greenwich School Of Management
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Country: United Kingdom
Questions:
1. Analyse the key elements that influences passengers’ travel decisions.2. Evaluate strategies employed by airlines to respond to the changing external influences.3. Investigate the tour operations sector within the travel and tourism industry.4. Explain the retail travel environment; examining the different types of travel agencies and the different relationships that exist within retail sector.
Answer:
Introduction
The Tourism Industry is a fragmented industry. A general tourist operation demands the participation of many other standalone industry sectors like Airlines, Hotels, cab Service providers, places of recreation, sightseeing options, restaurants, places for the shopping of the souvenirs and other services like banks, passport and Visa assistance etc.
This cluster of the services come together and forms a group or cartel for capturing business. On most of the occasions, it becomes a complex matrix of the services to deliver the wants and the desires of a Traveller. Travel agencies and tour operators sitting at the top of the food chain often handles this complex matrix and joins a set of services together to come up with a package (Kozak, 2016).
When we see the same industry from the point of view of airlines and try to answer a few questions connected to travel decisions of a tourist then we need to have an in-depth study of certain other departments like the functioning of tour operators, travel agencies, porters, various regulatory and rating agencies like ABTA, FTO and AITO etc.
In the current assignment, we are assembling an introductory report weaved around the operations of the Virgin Airlines. The contents of this fact file will define various sectors of the tourism industry from the point of view of the business model of the Virgin Airlines and its operational areas.
An analysis of the influencers influencing the travel decisions of the passengers
The Airlines sector across the world has seen many deregulations during the last three decades. With every Deregulation, this industry is inching towards becoming an industry with perfect competition market conditions. Most of the airlines are now catering to the influencers like Air services quality and price to divert consumer choice towards them.
Air Service Quality
The Air service quality is a variable feature for the travelers. The four contributing factors in the air service quality are availability, frequency, routing, and capacity. It is a complex scenario which is dependent on the travel plans of a commuter. Sometimes they look for shortest possible routes with minimum travel times. Sometimes they search for best connections to save time. The availability is also a very crucial factor.
In-flight experience
Virgin Atlantic is an airline that offers top-notch services under an affordable price bracket. They can be considered among the pioneers to introduce the culture of better or the best “In Flight Experience.” Simple factors like seats, service of the staff, punctuality, and others won them a 4-star airline rating. Almost two decades back they emerged as the game changer when they started marketing their goods not as a means of commutation but as the means of luxurious commutation (Gavine, 2018).
Pricing
In the case of the Airlines industry supply apart from the peak season affairs, supply creates its own demand, when in order to fill their vacant seat airlines offers cheap tickets. In general, the pricing of airlines follows the seasonal demand, bulk bookings, early bird bookings and quality driven pricing. With the arrival of travel booking sites, the number of walk-in clients is increasing rapidly. Most of the clients are price conscious. Bulk buyers also want their tickets to be cheaper because they are also fighting a price war in the market.
A premium brand with a youthful luxurious appeal
Sir Richard Branson, the promoter and the owner of the Virgin Atlantic is known for his showmanship in the industry sectors. This showmanship added a distinctive flair to the personality of the airlines. Let’s see it from the very basics, an airline fulfills the needs of commutation. Prior to the arrival of Virgin Atlantic in its full swing, most of the other airlines were battling it out on the merits of the pricing. In order to attract rich travelers, they were classifying certain seats as premium offerings.
Richard Branson added a sense of adventure and ambiance in the offerings of the Virgin Atlantic. We can understand it better with the help of a recent example. In the year 2018, Virgin Atlantic introduced a new fragrance under the name of “AIR.” This new fragrance will start following a passenger once he will enter inside any Virgin lounge, the same fragrance will accompany him inside the aircraft and finally in the Virgin Atlantic Cab services. Attempts like these created a distinctive appeal for the travelers. Traveling in the air and traveling in Virgin Atlantic Air is an altogether different experience (Turner, 2018).
Convenience
Virgin Atlantics has already made an entry into the world of CRM or customer relationship management with the help of virtual services. In the year 2015 they revamped one of their old services into Virgin Holidays, it was an upward integration where they acquired the role of a tour operator along with an airlines carrier. We are living in a data-driven world, as an airline, Virgin Atlantic is a privileged player in the market because they have a default access to the data of every passenger (McKanna, 2016). Now they are using the same resources to redefine the convenience for their customers. Right from the flight timings to the latest attractions available at the destination, everything is well covered under this umbrella.
Purpose of the Trip
It is very difficult to sell the same seat to a business traveler and tourist in the same breath. They both have different mindsets to the trip. A business traveler wants punctuality. He wants to stay closer to the working environment. A tourist on the other hand is seeking for fun and frolic. Most of the Airlines finds it difficult accommodate both types of the customers in the same boat. In order create a differentiation Virgil Atlantic created a new price slab for them under a different business economy class. Business travelers are frequent travelers. Virgin Atlantic also offered rebates on this special class and kept a control on the price on their offerings (Levere, 2018).
Virgin Atlantic on the Scales of Porter’s Generic Strategies
Porter’s generic strategies define the position of an organization under three major heads. They are differentiation, overall cost leadership, and focus. However, in most of the industry sectors, these theories are only applicable in the cases of utopian stages. In the current market conditions, in spite of the presence of some cartels, airline industry can be considered as a perfect competition market.
The Porter’s generic strategies diagram suggests that airline industry can thrive on the merits of cost focus and differentiation focus. Cost savvy passengers search for the lowest bids and the higher strata consumers’ demands high-quality flight experience.
The business model of the Virgin Atlantic emerges as the game changer in the market, instead of competing in the market they revamped their offerings from time to time and remain focused to figure out a corner where they can introduce differentiation of price at the lower level by introducing better quality solutions. Here we are presenting some recent examples of that (Branson, The Virgin Way, 2016).
Addition of value proposition in the economy class fares is an innovative idea
Virgin Atlantic has an interesting history connected with pricing based experiments. We can understand it better with the example that they set in the year 2018. In order to beat the price competition and avoiding the idiosyncrasy associated with the “In Flight Experience” they came up with three price brackets under the economy class, these three price brackets are Economy Delight, Economy Classic, and Economy Light . With a passage of time, they are rewriting the definition of price leaders in the market. In the past lowest bid was the best bid, however, Virgin added value into the proposition and now lowest bid with available best experience is the best bid. In other words, they successfully negotiated the focus of pricing without devaluing their offering (Taylor, 2018). Apart from it they also created a psychological differentiation in the mind of a customer where their economy class emerged as the superior class in comparison with the other airlines.
When the user has a personality the services should have a different personality
The appeal associated with the services and the purpose of the visit is another factor that contributes as an influencer in the decision of a traveler. Most of the other airlines defined the customers in three brackets. Here we have Travelers with an intention for tourism activity, business travelers and frequent travelers based on their loyalty history. Virgin Atlantic has a tradition of adding value-added services into the offerings while most of the other airlines are busy in creating fast corridors for the business class passengers on the airport. The Virgin Atlantic has already crossed that limit; they are not working on automated luggage counters for frequent travelers. Recently on the day of Valentine, some of the aircraft of Virgin Atlantic created the sign of heart in the sky with the help of Aircraft smoke (Corcoran, 2018). They are also introducing a Virtual room in the area of Cardiff where tourists can pre-visit a destination and the services that they will receive when they will purchase a package from a Virgin Holiday Outlet. We can clearly see it in the business model diagram of the Virgin Atlantic that they are a technology-driven player. Most of the other airlines are using technology to meet the ends at the E-commerce front and the front of the advertising and promotions. Virgin Atlantic, on the other hand, is aiming to create an end to end solutions for their customer (Davies).
They are hitting three birds from a single stone; first, they are adding an appeal and convenience in their offerings. Second, they are upgrading with the times and adding a real-time virtual network to their service. This virtual network has the power to deliver real-time end to end solutions to the woes of the customer. Third, they are weaving around a different kind of experience for the commuters and holding their position as the innovator in the market (Caswell, 2018).
Millennial generation wants a place for the creation of the perception
The age group of the travelers also plays a crucial role in the identification of travel decision influencers. Virgin Atlantic has a clear demarcation here, in a recent development they are planning to introduce some packages for the millennial generation. These innovative ideas are always adding a fresh appeal in the offerings of the Virgin Atlantic and keeping them ahead of their rivals. In a time when most of the other airlines are still the bettering the performances of their travel desks and other services at the airports and lounges (Cortez, 2018). Virgin Atlantic is creating a different kind of place where they can take the support of virtual reality and add an experience in the consumer perception. They are acting as a technology leader and carrying forward the legacy of the innovation that gave them the distinctive position in the market (Gilliland, 2018).
Tour Operators sitting at the helm of the Tourism Distribution system
Just like the retail industry or any other industry the tourism industry also thrives on a tourism distribution system. Companies like Unilever Company or Nestle Limited Company have a bright history behind them. Their success story can be summed up in two steps. In the first step, they invested in the retail distribution networks of any given company and in the second step they launched products that changed the local culture and created a demand for them. A chocolate in China, Noodles in India and toothpaste in Ghana, the list of such products is endless (Dhar, 2016).
When we study the case of the tour operators working in the tourism industry then it is the same story. Tour operators’ functions on two layers, in the first layer they identify new tourist spots across the world and with the help of the local authorities develop them for a new pasture for the tourism industry. Under the second layer, the tour operators motivate people inside their country to visit various places; they bring down the cost of the tours by purchasing the services for the tourist groups. Based on the operations of the tourism industry we can classify tour operators under certain categories (Laws, 2012).
Outbound Tour Operators & Inbound Tour operators
Outbound tour operators promote international tourism; they motivate people inside their locality to move abroad for the purpose of the tourism. Inbound tour operators receive international tourists in a given country and ensure a safe and pleasant passage for them. It becomes a complex business model when tour operators sign exchange treaties with each other. For instance, an American tour operator may send a tourist to India. Here the Indian tour operator will become the handler of the group. Indian company in return will develop outbound groups for the USA, now the US Company will be able to act as the principle handler of the group.
Domestic Operators and Specialist operators
Tour operators can be divided on the merits of the specialization of the area or the type of the tourism. Domestic operators are the operators that deal with the inland tourism. They develop domestic circuits with the help of local authorities. Tourism can be classified on the merits of various activities like adventure tourism, religious tourism & business tourism. Sometimes the flow of the clientele forces a tour operator to go for specialization in a certain area. This focus allows them to come up with specialization in any given area (Kay, 2003). The concept of mood tourism is picking up where certain tourists want a different kind of experiences all the time. For instance, an individual can ask for a skiing tour. Religious tourism is very prevalent in Asian countries, for instance, we can take the example of Buddhist circuit, and Countries like India, Japan and China have well developed Buddhist circuits and commands a regular flow of tourists (Kumari, 2011).
Mass Market Operators and Direct Sell Operators
The creation of the demand for the business and disposing of the supply are two crucial factors because the opportunities associated with the tourism are perishable. A vacant seat inside an aircraft cannot be compensated once the flight is over. It is the same with a vacant hotel room as well. Think about a sporting event like the Olympics or Football world cup. Mass tour operators generate the demand for any given circuit. Direct sellers sales the leftovers of the mass operators. In certain unorganized markets, direct sellers also club together the services from the unorganized sector and club them together (Weed, 2008).
(II) Industry Structure and Pie
IATA is among the leading organization playing the role of a regulatory authority in the aviation sector. According to their reports, we can draw a sketch of the industry structure for the aviation sector. A traditional flight distribution network works under a four-level chart, players like Virgin Atlantic fixes the price and the supply of the flights. After the announcement of the offerings a global distribution system handles it, Travel agents and other ticket booking counters handle the sale of the tickets and finally, it reaches to the customer. The layer of the global distribution systems handles all the strategy based affairs of the operations. Many neutral organizations are constantly working in the direction of the betterment of the airline’s industry under a healthy competitive environment (Albers, 2017). The third layer or the travel agents are in a fix in current markets because online booking portals are eating up their pies and creating a direct interface between the airlines and the customers. The role of travel agents is gradually confining to the group bookings and secondary market sales. Some of them have graduated to the online platforms, however, the website and dot.com boom are predominantly ruling this market (Montevago, 2018).
Virgin Atlantic relished this development as an opportunity, they came up with their online variant, apart from attracting new customers they are also working hard in the direction of retaining the old customers as well. The validity of the chart given by IATA stands on a theoretical level where the layers are changing the face but the structure of the foundation is still the same (Silver, 2018).
Trade Bodies and Legislations
IATA is the main body that deals with the internal issues of the aviation sector. It acts as the regulatory body and represents the aviation industry at the forums of world trade. Agencies like ABTA (Association of British Travel Agents) this association creates an umbrella for the travel agents and tour operators in Britain. It functions like a body ensuring the interests of the travel agents and tour operators in Britain. AITO (Association of Independent Tour Operators) is an autonomous body formed by the tour operators across Britain. On the similar lines, we have FTO (The Federation of the tour operators) and agencies concerned with the travel directives and EU packages (Cooper, 2009).
Most of these agencies are recognized by various governments and tourism-related bodies of the world. For a functional understanding of these bodies, we can compare their working model with NGO’s. Members elect a governing body, this governing body follows a constitution designed after the consent of the members and they take care of all the issues connected to tourism distribution trade largely. They make sure that illegal practices or unethical practices connected to the trade are not prevailing in the markets (Swanson, 2013).
The legislation under which the operations take place is designed by three bodies. First, we have governments, second we have international trade bodies and finally, we have these local bodies that recommend certain changes in the legislation.
(LO4)
Retail Travel Environment an unorganized sector competing with the organized players
In the year 2011, most of the planners of the marketing mix were heavily relying on the four P’s of marketing as they were described by marketing Guru Philip Kotler. Retail sector of the travel industry was prominent among them because they were doing a seasonal business, factors like place, seasonality and opportunity pricing were crucial for them. Things changed after the arrival of the dot.com boom and E-commerce facilities. Gradually the factors like the place and others got abolished with a passage of time. The only remains of the traditional business model left in the form of pricing (Kotler, 2016).
The role of the travel agents and retail environment
Broadly we can study travel agents in four categories.
Online travel agents
Independent Travel agents
Hotel Concierges
Visitor Information centres.
Travel agents can be compared with the retail counters of the tourism industry. In the current scenario, online travel agents or the travel agents that are receiving bookings from online sources are leading the pie in the UK market. Independent travel agents are catering to the excessive demands of the services during the peak season. Hotel Concierges meets with the immediate or last-minute demands of the travelers. Visitor information centers are mostly confined to providing information to the travelers. However, they hold the key to the consumer behavior under certain circumstances (Horner, 2016).
Types of the Travel agencies
We can study the travel agencies of UK under three headings.
Multiples: – Multiples travel agencies operate under a chain; it means they carry their operations on multiple places in an integrated fashion. We can take the example of Thomson Holidays. Another characteristic of multiples can be attributed to “Thomson Holidays” which have an international presence.
Miniples:- Miniples type of travel agencies may have many offices, however, in most of the cases they confine their operations to a locality or any particular circuit. They make tie-ups with various tour operators and act as a principle handler in any given area.
Independent Agencies:- Independent agencies are the agencies that can be considered as a separate molecule in the trade. Under a general qualification, we can say that they assemble local service providers under and sell their services under tailor-made packages for the tourists.
The relationships that exist between the travel agencies
Thomson Holidays of Britain also enjoys the status of being an international conglomerate under the umbrella of the TUI group located in Germany. In normal cases, they distribute franchises in the local market to gain a substantial control over the proceedings of the market. This is a vertical integration that they practice in the market. Miniples, on the other hand, join hands with international tour operators and cater to the client. It is a general norm where tour operators and others go for a vertical integration and hire other parts of services like hotels, cabs, airline tickets, visa and passport facilities, eateries and places of the amusement (Lane, 2000).
Broadly there are two types of agreements that can take place between a tour operator and a travel agency.
Commission based agreements
Free sell agreements
With the help of these agreements, the temporary ownership of a tourist can be managed. Under a commission based agreement, the tour operator transfers the rights of being a main handler to the travel agency. In return, he gets a commission on the earnings of the travel agency. It also means that the travel agency collects a part of the money from the customer. If the travel agency earns more in the process by convincing the client then a commission of the tour operator increases automatically (Singh, 2008).
Under a free sell agreement, a tour operator transfers all the rights to the travel agent on a pre-decided fee and separates himself from the operations. In the current practices, Commission based agreements are more prevalent because tour operators know this fact that they are sitting on the top of the fountainhead and has the power to generate a repeat customer with less effort.
Bibliography
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Branson, R. (2016). The Virgin Way. Mizan Kaifa, Indonesia .
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Cooper, C. (2009). Worldwide Destinations: The Geography of Travel and Tourism. Elsevire, New York.
Corcoran, K. (2018). A Virgin Atlantic plane drew a heart-shaped flight path in the sky for Valentine’s Day. Business Insider India, Viewed 6th August 2018 https://www.businessinsider.in/A-Virgin-Atlantic-plane-drew-a-heart-shaped-flight-path-in-the-sky-for-Valentines-Day/articleshow/62919284.cms.
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Davies, P. (2017). First Welsh Virgin Holidays store opens in Cardiff. Travel Weekly , Cardiff.
Dhar, M. (2016). Brand Shastra: Use the power of marketing to transform your life. Penguin UK.
Gavine, A. (2018). The story behind Virgin Atlantic’s forthcoming A330-200 interiors. Aircraft Interiors International, Viewed 06 August 2018, https://www.aircraftinteriorsinternational.com/news/airline-news/virgin-a330-200.html.
Gilliland, N. (2018). Brand campaigns in airports: Four creative examples. E-Consultancy , Viewed 6th August 2018 https://www.econsultancy.com/blog/70194-brand-campaigns-in-airports-four-creative-examples.
Horner, S. (2016). Consumer Behaviour in Tourism. Routledge, UK.
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Kumari, J. K. (2011). Buddhist Monuments: Their Role in the Development of Tourism in Andhra Pradesh. Readworthy Publications, India .
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McKanna, B. (2016). Virgin Atlantic finds community benefit with Salesforce. Computer Weekly , ( Online) Viewed on 3 Aug 2018, https://www.computerweekly.com/news/450401512/Virgin-Atlantic-finds-community-benefit-with-Salesforce.
Montevago, J. (2018). Independent Contractors Gaining Ground in the Travel Agent Community. (Online) Viewed on 3 Aug 2018, Travelmarket Report , https://www.travelmarketreport.com/articles/Independent-Contractors-Gaining-Ground-in-the-Travel-Agent-Community.
Silver, K. (2018). Airline customer satisfaction is higher than you might think, a survey indicates. (Online) Viewed on 3 Aug 2018, The Chicago Tribune , https://www.chicagotribune.com/lifestyles/travel/ct-airline-customer-satisfaction-20180507-story.html.
Swanson, J. R. (2013). Tourism Policy and Planning: Yesterday, Today, and Tomorrow.London,UK: Routledge.
Taylor, I. (2018). Special Report: Virgin Atlantic ramps up US services. Viewed on 3 Aug 2018. Travel Weekly , https://www.travelweekly.co.uk/articles/307239/special-report-virgin-atlantic-ramps-up-us-services.
Turner, S. (2018). The Newest Ways Airlines Are Trying to Improve The Flight Experience (And Minimize Jet Lag). Forbes, [Online] viewed on 2 Aug 2018, https://www.forbes.com/sites/sarahturner/2018/03/19/the-newest-ways-airlines-are-trying-to-improve-the-flight-experience-and-minimise-jet-lag/.
Weed, M. (2008). Olympic Tourism. London, UK: Routledge.
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