You must describe the functions of tour operating, with examples of how they are carried out, covering the full range prescribed for planning, selling, administration and operations. Timescales and commercial considerations should be evident within the descriptions.

1. Unit 13: Tour
Operations
Know how tour operators plan, sell,
administer and operate a package
holiday programme

2. How tour operators plan, sell,
administer and operate a
package holiday
*TO = Tour Operator

3. Planning
Planning includes the stages of:
Research
Forecasting
Product development
Methods of contracting
Costing the package
Data input
Working to a timescale

4. Research, forecasting and product
development
• Research takes place on a continuous basis.
• Research informs product development. TO’s are always
monitoring their sales, the competition and the market.
• Through researching these 3 areas, it allows them to forecast
what numbers they should offer in existing destinations, what
destinations should be dropped and which new destinations to
adopt.
• They will use many sources and trends to inform the process:

5. Research, forecasting and product
development
Sales figures
• When figures go down a decision
has to be made whether to drop the
destination.
• If figures go up a tour operator may
consider investing in more capacity.
Reports on consumer demand
from salespeople in
reservations and travel agents
• If people are asking about a travel
opportunity that isn’t being
provided, a TO will investigate
whether it would be profitable.

6. Research, forecasting and product
development
Research findings
• Sites such as Travel Trends, Mintel
and VisitBritain produce reports
that can be used.
Travel and Tourism
Conferences
• The main players hear about
exciting opportunities
PEST Analysis
• Analysing
• Political
• Economic
• Social
• Technological factors

7. Research, forecasting and product
development
• An organisation that uses and is aware of all the information will
make informed decisions about which destinations to include in
package holiday programs.
• Despite this, there are times when TO’s have to pull out of a
destination due to unforeseen circumstances for example a
terrorist attack.
• Product development includes changing the range of excursions
offered, the services offered during the flight and holiday and not
just the destinations.

8. Methods of contracting
• Contracts are usually fixed 18 months in advance.
• TO’s need to estimate the capacity in order to agree contracts
with hotels and airlines.
• There will be some adjustments later but it is difficult to make
major changes as prices will have been agreed and brochures
printed.
• It is hard to contract too far in advance as TO’s have to make
decisions based on sales and other research, about what to
include in their programme.

9. Methods of Contracting
• Different types of contract that might be organised for
accommodation include:
• A fixed contract
• An allocation contract
• An ad-hoc contract

10. Methods of Contracting
Fixed contract
• Is better for the supplier as it
means if the accommodation is not
sold they still get paid.
• Obviously this isn’t the best for the
TO.
Ad-hoc contract
• A TO will agree a rate with the
hotelier, but do not commit to a
specific allocation.
• When the TO receives a booking
they take up the room at a
previously agreed rate.

11. Methods of Contracting: An allocation
contract
Very popular with hotels.
They contract the TO for more beds than they have available.
The TO must confirm by an agreed date how many beds they will
take.
This gives the hotel time to sell the remaining beds at a
competitive price.

12. Methods of Contracting: An allocation
contract
Also applies to flights.
A small TO buys an allocation of seats on a flight if they cannot fill
a whole charter.
Once filled, it requests seats for extra bookings or looks for seats
on an alternative flight.
Customers may have to pay a supplement for these seats as they
will not be acquired at the original rate.
If the allocation cannot be sold, the unsold seats are returned to
the airline nut the deadline for this is 6 to 8 weeks before the
departure date.

13. Methods of Contracting: Situations
Fixed contracts aren’t as common as they use to be because TO’s
look for greater flexibility and control over costs.
It depends on which company (TO or supplier) is the more
powerful.
For example, if an independent hotel worked with Thomas Cook,
Thomas Cook would hold control. If an independant tour operator
wanted to work with Hilton Hotels, Hilton would have the power.

14. Methods of Contracting: Situations
• Flights are often contracted more than a season in advance.
• TO’s have to predict how many people will want to book i) a
particular holiday from a ii) particular airport.
• If they predict wrong, adjustments may be made but that is not
always possible. They may be able to contract another aircraft,
but it is hard to cancel a craft without being charged.

15. Methods of Contracting: Situations
• If a TO cannot achieve the required load factor, they may decide
to consolidate 2 flights.
• This means one flight will be cancelled and those passengers
transferred to another flight which may depart from a different
airport.
• This can cause customer dissatisfaction however they may be
given an extra couple of day’s holiday to fit in with the new flight.

16. Planning: Costing the Package
• Margins on package holidays are extremely low at around 4%.
• For this reason, costings have to be done extremely carefully
with accurate forecasting.
• This is difficult because they are carried out 18 months in
advance where many of the costs are subject to fluctuation.
• Fuel costs may rise and exchange rates fluctuate.
• Package Travel Regulations Act means surcharges cannot be
added to the holiday price.

17. Planning
Data Input
• Once contracts are agreed, an
assistant will load the supplier
information onto the company
database.
• They will ensure the contract
information is correctly entered and
maintained.
Timescales
• Planning a package holiday takes
up to two years. Some companies
have even longer term plans

18. Selling
Brochure Production
Pricing Strategies
Distribution
Promotion
Reservations
Commission
Late Sales

19. Brochure Production
• Printed a long time in
advance.
• Include prices even though it
is difficult to predict the
future.
• TO’s produce several
versions of the same
brochure in order to update
prices.
• Printing a brochure without
prices is illegal in the UK.

20. Brochure Production
• Is traditionally the main
source of information and an
important sales tool.
• Will be based on previous
years version unless the
company is new or it is a new
venture.
• Whilst this means they do not
have to photograph every
hotel every year and rewrite
text, it still takes a lot of time
to produce.
• 1. design the brochure.
• 2. Write copy (text)
• 3. Determine prices.
• The brochure must be
produced in good time to
allow sales.
• A summer brochure will be
produced in the spring of the
previous year.

21. Brochure Production: e-brochures
• Electronic versions of TO information of the type that traditionally
appears in print.
• Advantages – saves paper, ink, space and money. Can be
downloaded by a targeted customer and discarded with ease.
Prices can be altered.
• Disadvantages – TO’s have to invest in a content managing
system in order for it to be done properly. Customers may prefer
a paper version to browse through at home.

22. Pricing Strategies: Discount Pricing
• Through fixing contracts,
TO’s secure their supplies
(flights and rooms) at the
cheapest rate a long time
before the holiday.
• They then encourage early
bookings to ensure holidays
are not left unsold. This
ensures good cash flow.
• When early bookings are
high, TO’s can gage if their
will be much excess capacity
– hopefully for them, none.
They then take a substantial
deposit per person.
• TO’s can invest this money
as they don’t need to pay
suppliers until the holidays
are taken.

23. Pricing Strategies: Discount Pricing
• Tour operators aim to sell 95%
of holidays to maintain
profitability.
• When there is excess capacity,
TO’s are forced to discount
holidays at the last minute.
• Large TO’s make only 3-4% of
the price of the holiday as profit.
As the achieve such small
margins, if they have to
discount a holiday, they aim to
cover the costs.
• Selling Ancillary products is vital
to TO’s – it is where the profits
are made.
• This is why TO’s will charge
extra for transfers, late booking
fees and meals on the plane.

24. Pricing Strategies: Seasonal Pricing
• TO’s divide the year into
different seasons.
• Summer from May to
November.
• Winter from November to
May.
• In summer it is all about
beach holidays, whilst the
winter has ski programmes
running
Peak Season – is the busiest
times, normally when there are
school holidays.
Shoulder Season – slightly
less busy times either side of
peak season.
Off-peak Season – the least
busy times.
TO’s vary the capacity during
the seasons but must fill the
planes and hotels they
contract.

25. Selling: Distribution
• TO’s traditionally distribute packages through Travel Agents who
stock brochures and sell on their behalf taking commission.
• There is also Internet distribution where customers book directly
with TO’s or Travel Agents website.
• When booked by internet or phone with TO this is called a direct
sell.

26. Selling: Promotion
• Television advertising campaigns and press releases about new
products and destinations.
• Examples of press releases can be found in trade magazines.
• Can be aimed at holidaymakers or the trade.
• Trade promotion is important as professionals can bring
preferred products to the attention of their customers.
• Trade promotions include educational trips for agents and sales
incentives.

27. Selling: Reservation
• Most TO’s use computerised reservation systems.
• Reservation staff have to be well informed about the products they
sell.
• It is easier for TO’s than Travel Agents as they only need to know
about one companies products.
• Reservation staff in a call centre will have targets to meet with calls
answered and sales made.
• Others call customers if a query is made from the computerised
reservation system.
• When a booking is made, a reference code is created which allows
the booking to be traced through the system.

28. Selling: Commission
• TO’s pay commission to
Travel agents but can
negotiate how much.
• Tour Operators also receive
commission from third parties
whose products and services
they sell.
• E.g. Car-hire and insurance

29. Selling: Late Sales
• Once the flight has departed
the opportunity to sell has
gone.
• Late sales mean at least
some contribution to the cost
has been made even if there
is no profit.
• If the forecast for demand is
accurate, late sales can be
avoided.

30. Administration
Confirmations, itineraries and tickets.
Passenger manifests and rooming lists.
Errata
Cancellations and amendments.

31. Administration
Confirmations, itineraries and
tickets.
• Once a reservation has been
made, further administration is
dealt with by another team.
• The issue booking confirmations,
invoices after booking and send
reminders for payment.
• The issue tickets, itineraries and
other documents, for example
guides to the local area, as well as
booking details.
Passenger manifests and
rooming lists.
• Is a record of passengers.
• The administration department
must make sure suppliers such as
the hotel and airline are sent
passenger details.
• If there is a cancelation, suppliers
must be updated by the
administrators.

32. Administration
Errata
• Is the term used in publishing and
refers to corrections made after
publication.
• If a hotel only has one pool and the
brochure says 2, instead of
republishing the brochure a list of
corrections is sent to be read
alongside the brochure.
Cancellations and
amendments.
• Must adhere to the EU Package
Travel Regulations.
• A customer must have the
opportunitiy to read the policies on
cancellation or amendment in the
TO’s terms and conditions when
they book their holiday.
• If the TO has to cancel the holiday
they must offer a full refund or an
alternative holidays.

33. Operations
Consolidations
Load Factors
Overbookings
Transport Operations
Duty Office
UK and overseas resort liaison
Health and Safety
Emergency situations
Crisis Management
Quality Control
Customer Service
Excursion Sales

34. Operations
• Consolidations – is when there aren’t enough bookings to take
up the spare capacity on air seats or hotels. Instead of leaving
the seats empty, the capacity is cut with flights and hotels
cancelled (where contract allows) and people with bookings are
transferred to other flights and different accommodation.
• Load Factors – the ratio of paid passengers to available
capacity. The ideal load factor is 100%.
• Overbookings – an unusual occurrence where customers may
arrive at the airport and find no seats available. It is up to the
TO to solve the problem.

35. Operations
Transport Operations
• This refers to the organisation of
charter flights and in-resort
transfers. Transfers are usually
included in the package.
• On many bookings now, tour
operators may charge extra,
especially on late bookings.
Duty Office
• Smaller tour operators many not
have a dedicated duty office.
• Large tour operators have a duty
office which provide an essential
link between the UK and the
resorts. The office deals with any
non-routine occurrences, for
example medical problems , delays
etc.

36. Operations: UK and overseas resort liaison
• Package holidays include the services of a representative. The
reps are employed directly by the tour operator.

37. Operations
Health and Safety
• The reps will have a degree of
responsibility for health and safety.
Under the EU Package Travel
Regulations, the tour operator, not
the hotel , is responsible for the
customers health and safety.
Emergency Situations
• The reps have to also deal with
emergency situations. A good tour
operator lays down procedures to
be followed in such cases.
• The worst scenario involves some
ones death.

38. Operations
Crisis Management
• This is the most demanding
situation, it is dealing with a crisis
that effects a lot of customers.
Examples include mass food
poisoning, a bus crash or a
hurricane.
Quality Control
• Quality control is ensured by
different methods. Surveys are
often undertaken asking for
customers views on their holiday.
• The reports are monitored in resort
by senior staff.

39. Operations: Customer Service
• Tour operators provide routine customer service departments.
They may be divided into pre-departure customer service and
post-holiday customer service.

40. Operations: Excursion Sales
• Excursions are a very
valuable source of income
and an important part of the
reps job is to sell them.

41. Commercial
Considerations
Maximising Profitability
Links to different planning
Selling
Administration
Operations

42. Maximising profitability
The tour operator has to maximise the profitability of the planned
package holiday programme. Profitability has to be considered
throughout the stages of planning, selling, administration and
operation. There are various means of achieving this.

43. Links to different planning
Negotiating a more flexible contract with a supplier means that if
insufficient bookings are made they can b e cancelled with
penalty; remember: a fixed contract means that rooms or plane
seats have to be paid for whether they are filled or not.

44. Selling
Using appropriate pricing strategies maximizes profitability. For
example, discounting before absolutely necessary would damage
profits.

45. Administration
Having effective systems saves on costs. Where two companies
merge economies of scale can be achieved by merging
administration and operational systems
Tour operators terms and conditions include details of cancellation
charges. If a customer decides to cancel their holiday they will
lose a percentage of the cost.

46. Operations
If load factors on flights cannot be achieved, money can be saved
by consolidating flights. Where small numbers of passengers are
to be transferred from airports to hotels, the transfer options
should be studied. It can be cheaper to hire taxis as needed rather
than half-fill coaches.
Costs of customer service can be reduced if resort staff deal with
problems in resort rather than when the customer returns home.