PART II. Structural Change in the tourism sector

I. The Industrial Structure

The “techno-industrial” space

Raw materials

Final clients

TechnologicalDimension(vertical)

Marketdimension(horizontal)

The concept of « filière »

The vertical or technological dimension :

A “filière” describes a chain of activities transforming raw material to a final product.

Give examples

Representation of a « filière »

Raw materials

Transformation

transportation

distribution

Addedvalue

Exercice

Represents a tourism « filière »

The tourism « filière »

The specificities ?

Comment on every stage.

Tourist(the consumer)

Transportation

Transformation

Thedestination

The tourism “attractiveness” : an added value

The role of economic actor (private and public) in the “filière” : Create attractiveness tourism (output) with a specific destination (input).

The attractiveness is not given, is not “natural” : it is an economic output.

The creation of tourism value

Tour-operators

Travel Agencies

tourists

The structural change (I) : the direct distribution

Tour-operators

Travel Agencies

tourists

Retailing biggie(mass-distribution)

Consumers(as potential

tourists)

Question : What is the strategic objective of tour-operators ?

Observation : tours-operators are developing their own mass-distribution network.

Direct distribution of French T.O. (1997)

Tours operators

Market share (%)

Agencies number

Asia 18 4

Cit Evasion 18.5 13

Fram 22 67

Kuoni 24 12

Look-voyages 25 56

Pacha Tours 8 8

Rev’Vacances 2.5 4

E-tourism: the “virtual” agency

Tour-operators

Travel Agencies

touristsThe new consumer:« Potential tourists »

internet

Travel sales with internet in USA

0

2

4

6

8

10

12

14

16

1998 1999 2000 2001 2002 2003

billions $

PART II. Structural Change in the tourism sector

I. The Tourism firm

The production function

TechnicalCapital

(K)

HumanCapital

(L)

Fixed

Variable

standard

qualified

The firm Final product

Question : apply to a tourism firm.

INPUT OUTPUTcombination

The firm constraint and objective

OBJECTIVETo create wealth (Profit target) : output

value > input value

CONSTRAINTThe “optimal” payment of each input:

Labor (wage given by labor market) Capital (interest & dividend fixed by financial

market) Public factors (taxes fixed by government) Entrepreneur (profit as a residual income)

The Market Structure

Perfect competition : firm take the price.

Monopoly: firm make the price Imperfect competition (oligopoly):

firm influence the price. Oligopoly is between pure competition and monopoly.

Firm strategies

Strategic objective: to move on industrial space with Externalization Integration

(vertical, horizontal)

Agreement & alliances

Question: Find examples in tourism sector

Types of integration in travel & tourism

Concentration (absorption & fusion) in hospitality / tour-operating industries

Alliances in air-companies sector

Illustration 1

Illustration 2

Illustration 3

References

Evan N. and Stabler M.(1995) « A future for the package tour operator in the 21st century ? » Tourism Economics Vol. 1 Part 3, 245-263.

Gratton C. and Richards G. (1997) « Structural Change in the European package tour industry: UK/German comparisons » Tourism Economics, Vol. 3, Part 3, 213-226.

Sheldon P.J. (1986) « The tour operator industry analysis », Annals of Tourism Research, vol 13, 349-365.

Paper study:

B. Davies and P. Downward (Staffordshire University)

Competition and contestability in the UK Package Tour Industry: some empirical observations

Working Paper 98.3.

Exercice:

Production, cost and profit.