Ch1 unit 2


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Ch1 unit 2

  1. 1. The Retail Travel Environment
  2. 2. Introduction <ul><li>This session covers the start of a new Unit of Study: </li></ul><ul><li>Unit 7: Retail Travel Operations </li></ul><ul><li>There are links and overlaps with earlier Units of Study, especially Units 1, 2, 3 and 5. </li></ul>
  3. 3. The Retail Travel Environment <ul><li>A good starting point is ABTA (Association of British Travel Agents). </li></ul><ul><li>ABTA members account for more than 80% of all holidays and travel tickets sold in the UK. </li></ul><ul><li>ABTA’s data shows their members employ in excess of 120,000 people in the UK. </li></ul>
  4. 4. The Retail Travel Environment <ul><li>The three largest firms employ more than 27,000 individuals. </li></ul><ul><li>In the past 20 years, ABTA membership has fallen. </li></ul><ul><li>There are now fewer small independent travel agents. </li></ul><ul><li>The big firms have grown larger, ‘swallowing up’ many of the smaller agencies. </li></ul>
  5. 5. Recent Industry Data <ul><li>As of February 2005, there were 1,787 ABTA members in total. </li></ul><ul><li>Many members have more than one outlet (or office). </li></ul><ul><li>In total, ABTA members have over 6,700 offices. </li></ul>
  6. 6. Recent Industry Data <ul><li>More than 5,700 of these are travel agencies, over 450 are tour operators and almost 550 are dual members (acting as travel agents and tour operators). </li></ul>
  7. 7. Types of Travel Retailer <ul><li>There are three types of travel agent: </li></ul><ul><li>multiples </li></ul><ul><li>miniples </li></ul><ul><li>and independents </li></ul>
  8. 8. Multiples <ul><li>Multiple travel agencies have offices throughout the UK. </li></ul><ul><li>These national, sometimes international travel agency groups include firms such as </li></ul><ul><ul><li>* TUI * F irst Choice </li></ul></ul><ul><ul><li>* MyTravel * Thomas Cook </li></ul></ul>
  9. 9. Multiples <ul><li>Multiples dominate the industry, in terms of proportion of total turnover. </li></ul><ul><li>They are usually dual ABTA members. </li></ul><ul><li>They sell a wide range of holidays and other services such as flight tickets, car hire and hotel rooms. </li></ul>
  10. 10. Multiples <ul><li>Sometimes the multiples actually own the firms which offer these different services. </li></ul><ul><li>When this happens, it is called ‘integration’. </li></ul><ul><li>We will cover this concept in depth later. </li></ul>
  11. 11. Miniples <ul><li>Miniple travel agencies are usually based in regions of the UK. </li></ul><ul><li>Their strengths are local knowledge of their markets and trusted local branding. </li></ul><ul><li>Miniples often offer a simpler range of travel and tourism services than multiples. </li></ul>
  12. 12. Independents <ul><li>Independent travel agencies are usually single travel agencies. </li></ul><ul><li>They often offer a small range of services, which may be highly specialised. </li></ul><ul><li>There is a trend for independents to become part of a consortium. </li></ul>
  13. 13. Consortia <ul><li>‘Consortia’ is the name for more than one consortium. </li></ul><ul><li>A consortium can negotiate better prices from tour operators. </li></ul><ul><li>It may also be able to share marketing costs. </li></ul><ul><li>This helps independents compete with the multiples. </li></ul>
  14. 14. Consortia <ul><li>Worldchoice is an example of a travel agency consortium. </li></ul><ul><li>In this case, each consortium member is independently owned. </li></ul><ul><li>In 2006, it was estimated that there were 700 independent agents in the Worldchoice consortium. </li></ul>
  15. 15. Consortia <ul><li>In 2006, Worldchoice and two other groups, Global Travel and Advantage formed another consortium, called Triton Travel. </li></ul><ul><li>This is the largest travel agency in the UK, with an estimated 15% share of the UK travel agency market. </li></ul>
  16. 16. Integration in the Retail Travel Industry <ul><li>One of the main trends in the industry is the move towards greater integration. </li></ul><ul><li>This is where firms join together, through takeovers and mergers, to form bigger operations. </li></ul><ul><li>Larger firms can achieve economies of scale. </li></ul>
  17. 17. Economies of Scale <ul><li>These happen where a firm cuts its unit costs by doing things on a larger scale. </li></ul><ul><li>Larger firms sell more; their costs per unit are lower. </li></ul><ul><li>It’s often in a firm’s interests to increase the scale of its operations </li></ul>
  18. 18. Vertical Integration <ul><li>Integration can be either vertical or horizontal. </li></ul><ul><li>Vertical integration is where firms integrate at different levels of the distribution chain. </li></ul><ul><li>If a tour operator buys a travel agency, this is known as forward vertical integration </li></ul>
  19. 19. Vertical Integration <ul><li>In the above case, the tour operator spreads its business towards the customer, down the distribution chain. </li></ul><ul><li>Where a tour operator buys an airline, this is known as backward vertical integration </li></ul><ul><ul><li>The tour operator buys its own supplier, up the distribution chain. </li></ul></ul>
  20. 20. Horizontal Integration <ul><li>Where two travel firms which offer competing services join together, this is known as horizontal integration. </li></ul><ul><li>The aim is still to make economies of scale. </li></ul><ul><li>Advantage Travel is a form of horizontal integration. </li></ul>
  21. 21. Future Trends <ul><li>Current conditions in the retail travel industry may persist or change. Some of these trends can be summarised as follows: </li></ul><ul><li>Travel agency business becoming dominated by the multiples. </li></ul><ul><li>Greater concentration of retail outlets in the hands of consortia. </li></ul>
  22. 22. Future Trends <ul><li>New services offered to counter the threat posed by the Internet </li></ul><ul><li>Increased focus on business travel services </li></ul>
  23. 23. What Next? <ul><li>Now go to the Activity to take your understanding of the retail travel environment further. </li></ul>