Tour Operator Management

[Date]

Assignment 1

1.1 Tour Operator

“Tour Operator” as a term is often used in tourism industry and refers to a person or company that provides holiday packages. (Raju, 2009)

1.2 Role of Tour Operators

Tour operators play a major part in the production, selling and distribution of tourism services. A tour operator usually combines components of tour and travel to develop a holiday. They are guidebook for travelers. A tour operator has the responsibility for organising tours, whether they are for outings or historic locations. As a service provider, a tour operator puts together holiday destination packages that generally comprise preparations of travel, hotel, banqueting and recreation. Moreover, they give advice to tourists about shopping, touring and accommodation. They are usually self-employed and for that reason they must have an office, either physical or online, recruit support workers as their customer base develops and advertise to get more tourists as customers. (Raju, 2009)

1.3 Horizontal and Vertical Integration

Horizontal Integration happens when two industries merge together. Horizontal integration comprises horizontal mergers within each of tourism’s component sectors, as an instance, between different traveling or hotel companies. (Dwyer, Forsyth and Dwyer, 2010)

Vertical Integration happens when one organisations expands its business into a range of different domains. Vertical integration includes mergers across these component sectors, as an instance, between travel agencies and hotels. (Dwyer, Forsyth and Dwyer, 2010)

1.4 Advantages and Disadvantages of Horizontal Integration

Horizontal integration has been considered as ascertaining an industry’s profit rates, while allowing innovation, product differentiation and greater economies of scale as well (Coles and Hall, 2008). Horizontal integration is also considered as reducing costs, mainly if the merged firms are administratively centralised and rationalised (Song, 2012). From the perspective of corporate, though, this type of integration produces more instantaneous, short-term advantages, through the removal of direct market rivals and economies of scale. This will be striking in both post-Fordist and Fordist periods (Song, 2012).

The disadvantage of horizontal integration is that the business becomes too big very shortly that may create issues with management of resources. This can also cause problems with organisational communication and co-ordination because the newly bough business tries to fall in line with the existing firm. (Dwyer, Forsyth and Dwyer, 2010)

1.5 Advantages and Disadvantages of Vertical Integration

Vertical integration also ascertains an industry’s profit rates and allows innovation, product differentiation and greater economies of scale. One of the advantages of this integration is that it can enable tourism companies to gain a competitive advantage over their prosperous competitors, generating fences to entry and greater certainty of contracts. The main benefit of this integration is the increased control. Moreover, another advantage is that a hotel or an airline will be capable of investing in highly specialised assets, which could reflect a benefit over market rivals. This way hotel and other tourism firms can invest, and improve their products and services. (Dwyer, Forsyth and Dwyer, 2010)